The failure of a number of cryptocurrency projects, resulting in a global market correction, has prompted industry participants to warn that the situation might worse in the future.
In a December 4 interview with Fox News, Joe Lonsdale, creator of software startup Palantir and venture investor, predicted that the majority of bitcoin businesses would likely fail in a Ponzi scheme-style bankruptcy.
Nonetheless, Lonsdale emphasised that cryptocurrencies are here to stay and noted that centralized institutions would be the most impacted.
Indeed, the collapse of the FTX cryptocurrency exchange has shaken the cryptocurrency market, casting doubt on the sector’s viability. Despite the uncertainties, Lonsdale said that bitcoin technology would have additional applications in the future, such as allowing cross-border transactions in exchange for advancing financial freedom.
“It makes sense to have more decentralized authority and for cryptocurrencies such as Bitcoin to exist. <…> It has helped clients remove funds from Russia, Venezuela, and China. It affords the financial sector a greater degree of freedom against very reprehensible administrations, Lonsdale noted.
Notably, after the failure of FTX, doubts have arisen over the administration of centralized crypto firms. Notably, the disclosure of financial data is the most contentious issue.
In addition, numerous corporations have filed for bankruptcy after the 2021 market rally. Nevertheless, according to Lonsdale, the cryptocurrency market was mostly in a “speculative bubble powered by cheap money and a multitude of Ponzi scams.”
According to a Finbold article, former Securities and Exchange Commission (SEC) enforcement employee John Reed said that USDT stablecoin supplier Tether may be operating a Ponzi scheme due to a lack of transparency.
Similarly, Reed had previously criticized the administration of FTX, while financier Sam Bankman-Fried was criticized for his handling of client cash. Reeds claim that the situation at FTX is worse than the famed Bernie Madoff Ponzi scam.
