The Terra collapse resembles the fall of a financial pyramid, said Bill Ackman, the CEO and founder of Pershing Square Capital Management.
When I read about the ‘algorithm’ of @terra_money it sounds just like a crypto version of a pyramid scheme. 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.
— Bill Ackman (@BillAckman) May 17, 2022
For me, the ‘algorithm’ of Terra is a crypto version of a financial pyramid. There is no business. Investors were promised a 20% return. It is provided by a token whose value is sustained by demand from new investors
Ackman pointed to attractive terms in Anchor. The largest protocol of the Terra ecosystem until recently to earn 20% on deposits in UST. The reduction of the rate to 17.87% led to the loss of the stablecoin peg to the US dollar and the subsequent collapse of the ecosystem.
The price growth of the native token was supported by demand from new users and by supply constraints due to vesting, the billionaire added.
In the view of the CEO of Pershing Square Capital Management, the scheme and the hype allowed Terra to reach a scale that began to threaten the entire cryptocurrency market.
Ackman proposed self-regulation in the segment so that such projects without viable business models do not destroy both the bad and the good in the industry. The blockchain has enormous potential, he concluded.
Forbes called the collapse of UST and LUNA the ‘fifth reboot’ of the crypto market.
According to Goldman Sachs, will come only if they are widely used in payment transactions.
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