- Bill Ackman said Terra’s “stablecoin” sounded “like a crypto version of a pyramid scheme.”
- He called for the crypto industry to “self-regulate” projects with “no underlying business models.”
- The collapse of Terra was among the factors that led to last week’s crypto crash.
Billionaire investor Bill Ackman has weighed in on the implosion of the Terra “stablecoin,” saying he thinks of it as a “crypto version of a pyramid scheme.”
Ackman, the CEO of Pershing Square Capital Management, expanded on this stance in a series of tweets on Tuesday.
“When I read about the ‘algorithm’ of Terra, it sounds just like a crypto version of a pyramid scheme,” Ackman wrote. “Investors were promised 20% returns backed by a token whose value is driven only by demand from new investors in the token. There is no fundamental underlying business.”
Ackman’s remarks come after last week’s staggering crypto crash, which saw hundreds of billions of dollars worth of cryptocurrency being wiped out. The crash was wrought in part by the collapse of Terra, which was pegged to the US dollar. The “stablecoin” went into freefall after being “depegged” from the dollar, tumbling to as low as $0.30 on Wednesday.
Terra’s free-floating sister cryptocurrency, Luna, has also plummeted more than 97% in what analysts called a “death spiral.”
The rout also led to a crisis of confidence in the $1.2 trillion crypto market, with investors left in a precarious position while facing a loss of optimism in a crypto bear market.
Ackman criticized Luna on Tuesday, saying it “appreciated by attracting more followers” and limiting the supply of the token. This system then imploded when the sellers far exceeded the buyers, Ackman tweeted.
“The digitization of the Luna scheme and the hype about crypto enabled it to achieve enormous scale quickly,” he wrote.
Ackman added that while blockchain is a “brilliant technology with enormous potential,” crypto schemes like Luna could also derail the entire crypto ecosystem.
“The crypto industry should self-regulate away other crypto projects with no underlying business models before crippling regulation shuts down the good and the bad,” he tweeted. “Hyping tokens that are not supported by businesses that create value will destroy the entire crypto industry.”