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 the wake of the Terra blockchain losing most of its value within days as the de-pegging of its UST stablecoin caused a massive bank run.

The fact that UST offered a 20% return, with no fundamental business supporting its value, is the most telltale sign of a pyramid scheme, Ackman said late Tuesday. Protocol collapsed when LUNA suppliers outnumbered buyers.

Ackman is the founder of Pershing Square Capital, a hedge fund. His boisterous and highly engaged investing style has earned him the label of an “activist investor.”

Ackman praises blockchain, calls for more self-regulation

In a Twitter thread, the founder of Pershing Square praised blockchain as a “brilliant technology,” but added that projects like Terra gave the space a bad name. For Ackman, the digitization of LUNA and the hype surrounding the crypto market were the main reasons behind the platform’s popularity.

He called for more self-regulation by the crypto industry, especially for companies that don’t have underlying companies backing their tokens.

The crypto industry should self-regulate other crypto projects without underlying business models before crippling regulation shuts down the good and the bad. Hyping tokens not backed by value creation companies will destroy the entire crypto industry.

Fears of increased crypto regulation have increased 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 opposition to Terra founder Do Kwon over a proposed recovery plan. Kwon had proposed on Monday to transform the Terra blockchain into a new offshoot called Terra 2.0.

But several major crypto personalities, including Binance CEO Changpeng Zhao, criticized the plan, citing concerns that it would only dilute LUNA holders rather than create new value.

The Terra community has broadly called for the use of the blockchain’s reserves to return some value to the holders. Others have also suggested a mint and burn mechanic to support token prices.

With over five years of experience in global financial markets, Ambar plans to leverage this knowledge for the fast-growing world of crypto and DeFi. His main interest lies in finding out how geopolitical developments could affect crypto markets and what that could mean for your bitcoin holdings. When he’s not scouring the internet for the latest news, you can play him video games or watch Seinfeld reruns. You can reach him at [email protected]

The content presented may contain the author’s personal opinion and is subject to market conditions. Do your market research before investing in cryptocurrencies. The author or the publication is not responsible for your personal financial loss.

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