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Ethereum co-founder Vitalik Buterin believes that the cryptocurrency crisis will help reduce the volatility of digital assets to the levels of stock markets in the future. The developer believes that the fall of the crypto market, one of the prerequisites for which was the collapse of the Terra Form Lads project, has some advantages. The current situation has demonstrated the weaknesses of the digital asset sector.
“Price dropping will do a good job of revealing the problems that have been in the crypto industry from the very beginning. Unsustainable business models tend to be successful during a boom when all assets and investments are growing. This process can be temporarily supported by a constant influx of new dollars,” Buterin said.
He also pointed out that the default of the native LUNA token from Terra Form Lads was a clear illustration of how the fall in value shows unsustainable business models.
“During the loss of the UST stablecoin dollar peg, we saw that the algorithmic stablecoin model no longer worked. This is most noticeable in extreme situations, such as high leverage with Terra and Ponzi schemes, as was the case with the Bitconnect exchange,” said the programmer.
According to him, the volatility of cryptocurrencies in the medium term should approach indicators similar to traditional assets. Buterin is confident that digital assets will “definitely settle down and be about as volatile as gold or the stock market.”
And a new report from the International Monetary Fund says that the current monetary system is only effective when it is in a stable and secure position, but it can be improved. Cryptocurrency assets, in turn, are innovative, transparent, and they are able to adapt to changing conditions in financial markets.
Analysts believe that digital assets can become the basis for creating a future ideal monetary system. When developing a financial system, experts suggest combining the advantages of traditional money and cryptocurrencies.
“CBDCs can provide new technical capabilities, including programmability, composability, and tokenization, which will open useful opportunities for end users. In addition, they can act as digital money, make payments fast and secure, and transaction fees can be as low as 0.2%. At the global level, state cryptocurrencies can provide direct transactions between different central banks,” IMF analysts say.