The creator of Ethereum (ETH), Vitalik Buterin, is suggesting that a decline in the prices of crypto assets has benefits.
Buterin says in an interview with former Bloomberg Opinion columnist Noah Smith that the fall in prices is “good” at exposing weaknesses.
“I do think that price drops are good at revealing problems that were always there from the beginning. Unsustainable business models tend to succeed during booms because everything is going up, so the money people have at their disposal is going up, and so things can be temporarily propped up by a constant influx of new dollars.”
The Ethereum creator says that the collapse of the native token of stablecoin issuer Terra (LUNA) is an example of price crashes exposing unsustainable business models.
“During crashes, as we saw with Terra, this model no longer works. This is most true in extreme situations like high leverage and Ponzis (veterans of 2017 will remember ‘BIT-CONNE-E-E-E-ECT!!!’).
But it’s also true in more subtle ways like how protocol development is easy to sustain during bull markets but when prices crash the often newly expanded teams are hard to financially sustain.”
The founder of the alleged Ponzi scheme, Bitconnect, was indicted in February this year by a grand jury in a US court.
According to Buterin, the volatility of crypto assets will reduce in the “medium-term future” to a level similar to that of traditional assets.
“I definitely think that in the medium-term future cryptocurrencies will settle down and be only about as volatile as gold or the stock market.”
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