American investor Bill Ackman has said that schemes like Luna are a threat to the whole cryptocurrency ecosystem. His remark came after Luna, the sister token of stablecoin TerraUSD, crashed 100 percent on May 13.
Bill Ackman said in a Twitter thread that to him, the algorithm of Terra seemed 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,” he added. “There is no fundamental underlying business.”
Ackman said Luna gained value by attracting more followers and by limiting the supply of tokens. He added that it attained an enormous scale because of digitisation and the overall fanfare surrounding cryptocurrencies.
But once the number of Luna sellers overtook buyers, it collapsed, the investor added.
Ackman described digital ledger technology blockchain as a “brilliant with enormous potential” but flagged the risks associated with schemes like Luna.
He stressed on the need for self-regulation in the cryptocurrency industry.
“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,” he added. “Hyping tokens that are not supported by businesses that create value will destroy the entire crypto industry. Why and/or where am I wrong?
Exchanges around the world have delisted Luna after its crash. Its downfall began when sister token UST, which is also a stablecoin, was depegged from its $1 value as big investors started dumping it.