More cryptocurrency businesses will go bankrupt in a Ponzi scheme-style, but cryptocurrencies will still be an essential tool for international money transfers.
“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.
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.
Early in November, the Bahamas-based cryptocurrency exchange FTX declared bankruptcy under Chapter 11 after allegedly suffering losses of at least $1 billion.
BlockFi, a sizable cryptocurrency firm, also declared bankruptcy last week, joining Celsius Network and Voyager Digital in entering Chapter 11 proceedings.
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 unrest in the cryptocurrency markets, Lonsdale predicts that crypto-based technologies will continue to advance. According to Lonsdale, the blockchain technology used in cryptocurrencies makes it possible to
“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.”
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