More crypto companies are going to fall to Ponzi scheme-style bankruptcy, but cryptocurrency will remain a crucial tool for exchange funds globally, a venture capitalist told Fox News.
“Overall, I think you’re going to have most things crash,” said Joe Lonsdale, an investor and a co-founder of software company Palantir. Various crypto lenders, crypto tokens and other parts of the ecosystem were “a Ponzi scheme, and it made no sense whatsoever.”
“This is what you’d expect in any situation where you have stuff that’s not regulated,” he added.
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Over the last several years, crypto projects have been “valued not based on cash flows, not based on creating value in the economy, but based on what people would pay for it,” Lonsdale said.
FTX, a Bahamas-based crypto exchange, filed for Chapter 11 bankruptcy in early November after reportedly losing at least $1 billion.
Another large crypto company, BlockFi, also announced its bankruptcy last week, following other crypto companies like Celsius Network and Voyager Digital into Chapter 11 proceedings.
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Some companies that have declared bankruptcy “have had a lot of corruption,” Lonsdale said, though he only named FTX. “Long term, there’s a good part of crypto, but most of what we saw in crypto the last three, four, five years was a speculative bubble driven by cheap money and driven by a lot of these Ponzi schemes.”
Despite the recent turmoil in cryptocurrency markets, crypto-based technologies will continue developing more capabilities, according to Lonsdale. Blockchain technology used in cryptocurrencies allows funds to be transferred online without using traditional government or bank infrastructure, enabling a new and important way to move money globally, Lonsdale said.
“It does make sense to have more decentralized power and for something like Bitcoin to exist,” he said. “It’s helped people get money out of Russia, out of Venezuela, out of China.”
“It allows more kind of liberty for the financial system from really bad-acting governments,” Lonsdale continued.
Blockchain technology will still be an important part of the future, the venture capitalist said.
“This ecosystem, long term, I think you will have some of this stuff emerge as useful for the world,” he said. “But that’s not all we’re seeing right now.”
To watch the full interview with Joe Lonsdale on the future of crypto, click here.
Source: Fox News