Billionaire investor Bill Ackman says the epic collapse of Terra ($LUNA) and algorithmic stablecoin TerraUAD ($UST) has uncovered a crypto version of a pyramid scheme.
In a series of tweets, Ackman shared his views on the price decline of $UST, which was once believed to be tied to the value of $1. Ackman said his study of Terra’s algorithm revealed what he likened to a “crypto version of a pyramid scheme.” He noted that investors were promised a 20% return backed by a token that generated value as demand from new investors increased.
When I read about the ‘algorithm’ of @terra_money it sounds like a crypto version of a pyramid scheme. Investors have been promised a 20% return backed by a token whose value will be determined only by new investor demand for the token. There is no fundamental underlying business.
— Bill Ackman (@BillAckman) May 17, 2022
According to the billionaire, Terra “had no fundamental underlying business.” Ackman said Terra’s main appeal is to attract more followers and cap supply of its token through a vesting schedule. He argued that the price drop occurred when Terra’s sellers overwhelmed the buyers.
Ackman went on to call blockchain a “brilliant technology with tremendous potential,” but said the industry has been marred by debacles like Terra. He argued that Terra was made possible by the “hype surrounding crypto” and that “schemes like Luna threaten the entire crypto ecosystem.”
Ackman warned that the crypto industry should work towards self-regulation, including scrapping digital asset projects that have no underlying business model. He claimed the alternative is “crippling regulations” that affect both good and bad projects. The billionaire also chided the industry for hyping tokens “not backed by companies,” saying the behavior could ultimately destroy the entire industry.
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The views and opinions expressed by the author or any person mentioned in this article are for informational purposes only and do not constitute financial, investment or other advice. Investing in or trading in cryptoassets involves risk of financial loss.
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