Bill Ackman, a billionaire investor, compares Terra's 'algorithm' to a crypto-based pyramid scam

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Ackman tweeted his disdain of Terra and that the cryptocurrency industry 'self-regulate' projects with 'no underlying business concepts.'

Bill Ackman, a billionaire investor, commented on the collapse of the Terra "stablecoin" by comparing it to a "crypto equivalent of a pyramid scheme."

Tuesday's tweets from Ackman, CEO of Pershing Square Capital Management, elaborated on this stance.

"When I read about Terra's 'algorithm,' it sounds just like a crypto pyramid scheme," Ackman remarked. "Investors were promised 20% profits backed by a token whose value is solely determined by the demand from new investors. There is no underlying business structure."

Ackman's comments follow last week's catastrophic cryptocurrency crisis, in which hundreds of billions of dollars' worth of bitcoin was wiped away. The crash was caused in part by the collapse of the dollar-pegged Terra currency. After being "depegged" from the dollar, the value of the "stablecoin" plummeted to as low as $0.30 on Wednesday.

Luna, the free-floating sister cryptocurrency of Terra, has likewise dropped more than 97% in what observers have termed a "death spiral."

The decline also precipitated a crisis of trust in the $1.2 trillion cryptocurrency industry, leaving investors in a perilous situation and reducing their optimism in a bear market.

Ackman blasted Luna on Tuesday, stating that its value "increased by recruiting more followers" and by limiting the token's supply. Ackman tweeted that the system disintegrated when the number of sellers considerably exceeded the number of purchasers.

"The digitization of the Luna plan and the crypto craze allowed it to achieve rapid growth," he added.

Ackman stated that while blockchain is a "wonderful technology with huge potential," crypto scams such as Luna have the potential to destabilize the entire cryptocurrency ecosystem.

"The cryptocurrency sector should self-regulate away crypto projects with no underlying business concepts before debilitating legislation closes down both the good and the bad," he tweeted. The entire cryptocurrency sector will be destroyed by tokens that are not backed by businesses that create value.

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