Take a look at how contagion hit firms with poor balance sheet management

by | Sep 10, 2022 | Market, Market News, News | 0 comments

It has been noted by various studies and research that the contagion that was prompted by sudden Terra’s implosion in the recent year sped to those companies who have poor balance sheet management. It went on to affect companies and protocols that did not have any underlying blockchain technology. This particular fact was tested by one of the leading personalities in this sector and the managing director’s director of Kraken  Australia in a recent interview. This matter is also being looked into to light it further and to bring more details to the public’s attention.

What were the statements published by Kraken’s managing director?

In a conversation with major crypto-based media platforms, the managing director of Kraken stated that the Ethereum -based Defi systems have shown their fundamental strength, particularly this year, by withstanding the worst market conditions that it was exposed to. In a statement released by the head of this sector, it was also stated that the contagion that was studied across various crypto markets in various spaces had a similar trend or system in place. All of it showed the same traditional finance type lending model which was atop every crypto model.

However, as the head further stated, a failure of the basic protocols that were the foundation of it all was noticed. It is this failure that led to the disruption in the whole system. However, this disruption has also been acknowledged and steps are also being taken to revive these systems from their broken state. People have started recognizing the problems underlying it all and measures are being taken to prevent it in the future as well.

Trends shown in the other platforms

It has been observed through studies and analysis of various platforms such as Ethereum that, when the volatility hit these platforms did not have to incur huge losses. It was also noticed that the decentralized-based models such as decentralized markets, decentralized lending models as well as decentralized systems, in general, did not show a decline in any way. No sign of contagion was experienced on these platforms.

It has also been observed that the poor balance sheet management that has been the reason for this fall was noticed in closed shop trade fee lenders. Therefore, the problem lies with it all being recognized and the cause was brought to the attention of those attached to it.

A further look into the matter

Even though the decentralized systems have had their share of ups and downs of which enough proof exists in the market, it has also been observed that most of them have been able to win back the majority of their daily active users. It has proven to be quite a successful endeavor for them. It has also been noted by various leading personalities of this sector, that those systems that faced troubles had poor blockchain technology. It was because of the design of their underlying protocols which were miserably poor and this became the cause of their downfall.

The problem with such systems has been informed to be with treasury management and not the system itself.


When it came to the endurance and stability Kraken showed in the recent bear market, it has been observed that it was because it was well prepared for it beforehand. It has also been mentioned by the leading authorities of Kraken that even though it has had to suffer major downfalls in the past, it is still able to survive it all. It had not spent a lot of money on marketing strategies in the bull market last year which could be a cause of its downfall.

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