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The collapse of Terra is similar to the collapse of a financial pyramid scheme, said billionaire Bill Ackman, 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 — cryptoversion of the financial pyramid. There is no business. Investors were promised a yield of 20%. It is provided by a token, the value of which is maintained by the demand of new investors. “,” he wrote.
Ackman cited attractive conditions at Anchor. The largest protocol of the Terra ecosystem until recently allowed you to get a yield of 20% on deposits in UST. The rate cut to 17.87% led to the loss of the stablecoin peg to the US dollar and the subsequent collapse of the ecosystem.
The growth in the price of the native token was supported by demand from new users and the restriction of supply due to vesting, the billionaire added.
According to the CEO of Pershing Square Capital Management, the scheme of work and hype allowed Terra to reach such a scale that began to threaten the entire cryptocurrency market.
Akman proposed to introduce self-regulation in the segment so that such projects without working business models do not destroy both bad and good in the industry. Blockchain has “huge potential,” he concluded.
Recall, Forbes called the collapse of UST and LUNA the “fifth reset” of the crypto market.
According to Goldman Sachs, the popularization of algorithmic stablecoins will come only if they are widely used in payment transactions.
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