Billionaire investor Bill Ackman says that the epic collapse of Terra ($LUNA) and algorithmic stablecoin TerraUAD ($UST) has exposed a crypto version of a pyramid scheme.
In a series of tweets, Ackman shared his views on the price collapse of $UST, which was once thought to be pegged to the value of $1. Ackman said his investigation into the algorithm of Terra revealed what he likened to a “crypto version of a pyramid scheme.” He noted that investors were promised 20% returns backed by a token that generated value from increasing demand via new investors.
According to the billionaire, Terra had “no fundamental underlying business.” Ackman said Terra’s primary draw was to attract more followers and limit the supply of its token via a vesting schedule. He argued that the price collapse occurred when the sellers of Terra overwhelmed buyers.
Ackman went on to call blockchain a “brilliant technology with enormous potential,” but said the industry was marred by debacles like Terra. He argued that Terra was enabled by the “hype about crypto,” and that “schemes like Luna threaten the entire crypto ecosystem.”
Ackman warned that the crypto industry should work to self-regulate, including doing away with digital asset projects that have no underlying business models. He claimed that the alternative would be “crippling regulations” affecting both good and bad projects. The billionaire also chastised the industry for hyping tokens “not supported by businesses,” and said the behavior could ultimately destroy the entire industry.
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