Bill Ackman, billionaire CEO and founder of Pershing Square Capital Management, said Terra’s collapse was like the collapse of a financial pyramid.

When I read about the ‘algorithm’ @terra_money it sounds just like a crypto version of a pyramid scheme. Investors were promised 20% returns, backed by a coin whose value is driven solely by demand from new investors in the coin. There is no underlying core business.

— Bill Ackman (@BillAckman) 17 May 2022

“For me, Terra’s ‘algorithm’ – crypto version of the financial pyramid. No job. Investors were promised a 20% return. Its value is provided by a token backed by demand from new investors.”He wrote.

Ackman quoted the attractive terms in Anchor. Until recently, the largest protocol in the Terra ecosystem allowed a 20% return on deposits in UST. Lowering the rate to 17.87% caused the stablecoin stable to drop to the US dollar, followed by the collapse of the ecosystem.

The billionaire added that the increase in the price of the native token was supported by the limited supply due to demand and entitlement from new users.

According to the CEO of Pershing Square Capital Management, the work plan and the hype allowed Terra to reach such a scale that it began to threaten the entire cryptocurrency market.

Ackman suggested self-regulating the segment so that such projects, for which business models do not work, do not destroy both the good and the bad in the industry. Blockchain has “huge potential,” he concluded.

Recall that Forbes called the collapse of UST and LUNA the “fifth reboot” of the crypto market.

According to Goldman Sachs, algorithmic stablecoins will only become popular if they are widely used in payment transactions.