Activist investor Bill Ackman weighed in on the recent Terra crisis, calling the protocol a crypto version of a pyramid scheme.
Ackman’s comments come in wake of the Terra blockchain losing most of its value in the span of a few days, as the de-pegging of its UST stablecoin cause a massive bank run.
The fact that UST offered a 20% return, with no fundamental business backing its value, is the most telltale sign of a pyramid scheme, Ackman said late-Tuesday. The protocol collapsed once LUNA suppliers surpassed buyers.
Ackman is the founder of Pershing Square Capital, a hedge fund. His boisterous and highly involved investment style has earned him the tag of an “activist investor.”
Ackman praises blockchain, calls for more self-regulation
In a Twitter thread, the Pershing Square founder praised blockchain as being a “brilliant technology,” but added that projects like Terra gave the space a bad name. To Ackman, the digitization of LUNA and the hype around the crypto market were the key reasons behind the platform’s popularity.
He called for more self-regulation by the crypto industry, especially towards businesses that have no underlying businesses backing their tokens.
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. Hyping tokens that are not supported by businesses that create value will destroy the entire crypto industry.
Fears of increased crypto regulation have been growing in the wake of the Terra crisis. Several top officials in the United States and Europe have called for laws to protect investors from such a crash.
Terra recovery plan widely criticized
Ackman’s comments also come amid widespread backlash against Terra founder Do Kwon over a proposed recovery plan. Kwon had on Monday proposed forking the Terra blockchain into a new offshoot, titled Terra 2.0.
But several major crypto personalities, including Binance CEO Changpeng Zhao, criticized the plan, citing concerns that it would just dilute LUNA holders, instead of creating new value.
The Terra community has broadly called for using the blockchain’s reserves to return some value to its holders. Others have also suggested a mint and burn mechanic to help support token prices.
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