IMF Chair Advises Against Ditching Crypto After Terra Crash
International Monetary Fund (IMF) Chair Kristalina Georgieva during the World Economic Forum’s annual meeting on Tuesday said the collapse of Terra’s algorithmic stablecoin UST should not make people abandon cryptocurrencies. Kristalina Georgieva believes the crypto market is important as it offers faster service, much lower costs, and more inclusion.
IMF’s Kristalina Georgieva Hails Crypto Despite Terra Collapse
During the World Economic Forum’s annual meeting in Davos, Kristalina Georgieva urges investors not to abandon the crypto market despite the collapse of Terra’s UST and LUNA as not all digital currencies are the same, reported Bloomberg.
“I would beg you not to pull out of the importance of this world. It offers us all faster service, much lower costs, and more inclusion, but only if we separate apples from oranges and bananas.”
IMF’s Kristalina Georgieva thinks every investment asset comes with some level of associated risks, and so do cryptocurrencies. Therefore, stablecoins backed by cash and other assets are different from stablecoins supported by algorithms. Stablecoins are cryptocurrencies supposed to maintain a 1:1 peg with reserve assets like the US dollar.
The collapse of algorithmic stablecoin TerraUSD or UST caused massive liquidation across the crypto market. This should be a lesson for investors to avoid such risky assets that are less backed. Thus, investors should continue to invest in cryptocurrencies.
“The less there is backing it, the more you should be prepared to take the risk of this thing blowing up in your face.”
Kristalina Georgieva also urges regulators around the world to protect investors through crypto regulations and education. Moreover, she warned against confusing crypto products with currencies. Anything not backed by a sovereign guarantee can be an asset class, but not a currency.
Crypto Market Remains Under Pressure
The crypto market has been under pressure since the collapse of Terra’s UST and LUNA, decreasing investors’ trust in the market. Top cryptocurrencies Bitcoin and Ethereum are trading in a range for the last 2 weeks. Bitcoin and Ethereum struggle to maintain over $30,000 and $2000, respectively.
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