The crypto contagion sparked by Terra’s infamous implosion this year only spread to companies and protocols with “poor balance sheet management” and not the underlying blockchain technology, says Kraken Australia’s managing director Jonathon Miller.

Speaking with Cointelegraph, the Australian crypto exchange head argued that sectors such as Ethereum-based decentralized finance (DeFi) revealed its fundamental strength this year by weathering severe market conditions:

“Some of the contagion that we saw across some of the lending models in the space, [was in] this traditional finance kind of lending model sitting on top of crypto. But what we didn’t see is a kind of catastrophic failure of the underlying protocols. And I think that’s been recognized by a lot of people.”

“Platforms like Ethereum did not fail when the volatility hit. You saw decentralized markets, decentralized lending models, DeFi in general, not fall over. There was no contagion there. What you saw was poor balance sheet management from closed shop trade fee lenders,” he added.

Miller’s comment comes despite CoinGecko reporting a 74.6% market cap decline in DeFi during Q2 2022 following the collapse of Terra and a rise in DeFi exploits. Though the crypto data aggregator also noted that the industry managed to retain most of its daily active users. 

Miller also added that blockchain projects only ran into issues when the design of their underlying protocols was “obviously poor”, such as the case of Terra’s algorithmic stablecoin TerraClassic USD (USTC).

“I think that’s a trade off. There’s a Treasury management problem, not a blockchain problem,” he said.

Questioned about how Kraken fared through the crypto bear market this year, Miller suggested the company was well primed to deal with the volatility. He noted that the company has survived many downturns in its 11-year history, and notably didn’t blow a lot of money on marketing during the bull run last year.

“We’re in a slightly different position as perhaps some of the other exchanges that have been out there spending lots of money on advertising. We’ve got a really strong word-of-mouth business model,” he explained.

Related: Crypto contagion deters investors in near term, but fundamentals stay strong

Miller was also optimistic about the current state of the Australian crypto sector, stating that there are a lot of “bullish underlying signals from businesses who are still building products.”

He pointed to major banks such as ANZ recently testing the use of its own stablecoin on Ethereum, and major payments giants such as Mastercard joining the Blockchain Australia Association, signaling strong “intent to become involved in crypto and blockchain.”

“So you know, institutions making use of the underlying tech, maybe some heat out of some of the speculative characteristics, that we saw through 2022, which is potentially even a good thing.”