Vitalik Buterin, co-founder of Ethereum, has openly criticized the current status of the DeFi market. Buterin said, “There is no real investment in the world that can give 20% returns every year,” while assessing the collapse of the Terra ecosystem.
The Terra implosion has sparked a massive sell-off in the crypto market, particularly in the DeFi market. In a few weeks, the TerraUSD (UST) stablecoin lost its dollar peg and fell to zero. This triggered a massive sell-off in LUNA, wiping away more than $60 billion in investor capital.
Vitalik Buterin advocated more monitoring on the DeFi market, based on the present case. Buterin said in a statement to Bloomberg that
“The increased examination of defi financial processes, particularly those that strive to maximize ‘capital efficiency,’ is extremely desirable. Even more welcome is the growing recognition that current performance is no guarantee of future returns (or even future absence of utter collapse).”
The Ethereum co-founder also highlighted the need to assess the stability of systems. He added, however, that their performance should be monitored in extreme situations or under pessimistic conditions to see if they could withstand the turbulence. Buterin also mentioned technical difficulties with automatic and algorithmic stablecoins.
Impact Of Terra Collapse On Defi
The decentralized finance (DeFi) space has taken a hit as a result of the Terra collapse. According to Bloomberg,
“After the collapse of Terra reduced the overall value of the sector, DeFi developers are dusting themselves off and sluggish markets aren’t going to convince them that the time is right to get back into the game.”
Altcoins tied to the DeFi ecosystem have plummeted the most in the previous 24 hours. Top Defi cryptocurrencies including ETH, SOL, AVAX, and DOT have all corrected between 10% and 20%.
