Earlier this month, the Terra stablecoin ecosystem and its associated tokens UST and LUNA collapsed. It caused huge losses and liquidations of other cryptos. The result was almost a chain reaction, of which Tether, among others, was a victim. Tether’s Chief Technology Officer Now Declares TerraUSD No back pull used to be. At the same time, famed hedge fund manager and billionaire Bill Ackman disagrees.

Tether: Terra Was ‘Castle of Cards’

Tether CTO Paolo Ardoino was a guest on the Coins podcast. He explains to host Patrick McLain that Terra’s algorithmic stablecoin TerraUSD (UST) is not a back pull or pyramid scheme, but a poorly designed ‘castle of cards’. He gives Terra founder the benefit of the doubt. He started with Terra out of arrogance, and others probably joined them for economic reasons, he thinks. The project was poorly designed, as many projects are poorly designed.

He may have known it was a poor quality project, but couldn’t tell because otherwise it would have collapsed even faster. Many people who know Ardoino thought it was a flawed project, but this was clearly not the case for many other investors.

He thinks regulators should better define which categories the various stablecoins fall into. UST was an algorithmic stablecoin whose value was guaranteed by bots that buy and sell the token automatically, Tether’s USDT is a centralized collateralized token. Those are two different situations.

Terra was ‘a pyramid scheme’

Famous investor Bill Ackman thinks otherwise. He came into the limelight with his short on Herbalife, which is known for a pyramid scheme that had people selling nutritional supplements for huge sums of money. Many people have lost a lot of money on this, while the top of Herbalife made a lot of money on it. The situation with TerraUSD and LUNA was similar, according to Ackman.

High demand was the only source of the token’s value. Furthermore, there was no underlying revenue model, emphasizes the fund manager. Investors were promised a return of 20%, but that requires growth. As soon as the sellers overwhelmed the buyers, the project collapsed.

They are two contradictory opinions, and it is up to the judge to determine who is right. Yesterday we wrote that the company behind Terra has run into trouble and is under investigation by the South Korean tax authorities.

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