Bill Ackman likens Terra's algorithm to crypto version of a pyramid scheme

Terra's (UST-USD) algorithm "sounds just like a crypto version of a pyramid scheme," billionaire investor Bill Ackman wrote in a Twitter post May 16. Note the Terra protocol produces algorithmic stablecoin TerraUST (UST-USD), which aren't backed by traditional assets, and governance token LUNA (LUNA-USD), which absorbs UST's price volatility. It all comes down to supply and demand: Through lending application Anchor Protocol, which held most of TerraUST's (UST-USD) circulating coin supply in the beginning of May, offered investors staking rewards of 20% "backed by a token [LUNA] whose value is driven only by demand from new investors in the token," Ackman explained. "There is no fundamental underlying business," he added. Ultimately, LUNA (LUNA-USD) started to collapse on May 9, as "the supply of sellers of Luna overwhelmed the buyers," Ackman said in a follow-up tweet. On that same day, UST also became unpegged, though fiat-backed stablecoins like Tether (USDT-USD), the largest