- A millionaire Wall Street investor suggested that the crypto asset market could be operating like a huge Ponzi scheme, since cryptos do not have any backing.
- Through his Twitter (NYSE:TWTR) account, the CEO of Pershing Square Capital Management, Bill Ackman, warned that some cryptocurrencies harm the crypto ecosystem.
“When I read about the ‘algorithm’ of @terra_money it sounds just like a crypto version of a pyramid scheme,” commented Bill Ackman, the CEO of Pershing Square Capital Management, a Wall Street hedge fund management firm, on Twitter after the collapse of stablecoins in recent days.
Akcman said that “investors were promised a 20% return backed by a token whose value depends solely on demand from new investors in the token,” referring to the Terra USD crash last week.
“There is no fundamental underlying business” behind cryptocurrencies, the American investor added to argue his thesis.
The collapse of Terra USD and its entire ecosystem caused a general loss of about 30,000 million dollars, among the 200 thousand investors who believed in the project created by Terraform Labs.
As of mid-April, Terra USD was the third-largest stablecoin by market cap and was trading at $119 to drop on Wednesday (5:04 pm ET) to $0.09612 cents, according to Coinmarketcap.
“Schemes like Luna threaten the entire crypto ecosystem” Regarding Luna Terra, UST’s counterpart, the billionaire noted that “the digitization of the Luna scheme and the hype about crypto enabled it to achieve enormous scale quickly.”
A month ago Terra Luna was trading at $98, and now its price is pretty close to zero.
However, Ackman acknowledges that "Blockchain is a brilliant technology with enormous potential," but warns that "Schemes like Luna threaten the entire crypto ecosystem." He states that “The cryptocurrency industry should self-regulate other crypto projects with no underlying business models before crippling regulation shuts out the good and the bad.”
Massive Market Run
The fear in the markets of recession and the increase in interest rates by the Federal Reserve have increased the volatility of all cryptocurrencies, causing great losses to their holders, including mining companies and exchanges.
Faced with the collapse of prices and the pessimistic sentiment that invades the market, a massive sale took place. Many investors, large and small, have dumped much of their crypto holdings in favor of safer assets.
Although Terraform Labs and its CEO Do Kwon have tried to stop the bleeding, so far the attempts have been unsuccessful. Now the discussion turns to how to regain investor confidence.
On the Flipside
- Now desperate investors are demanding their money back from Terraform Labs, along with major industry players.
- Ethereum co-founder Vitalik Buterin is proposing that money from the Luna Foundation Fund, which finances Terra, be used to save the investments of smaller investors.
- The CEO of the Binance exchange, Changpeng Zhao, proposes prioritizing payments to small investors over whales, which only represent 0.4% of the community.
"To lead by example on PROTECTING USERS, Binance will let this go and ask the Terra project team to compensate the retail users first, Binance last, if ever," Zhao wrote in a tweet.
Why You Should Care
- The fall of Terra USD has put Washington regulators on alert. SEC Secretary Gary Gensler said investors need to be better protected or faith in the cryptocurrency market will be lost.