More crypto companies will go under from the bankruptcy of the Ponzi scheme, but cryptocurrency will continue to be a critical resource for exchange funds worldwide, a venture capitalist told Fox News.
“In general, I think most things will crash,” said Joe Lonsdale, an investor and co-founder of software company Palantir. Several crypto lenders, crypto tokens and other parts of the ecosystem were “a Ponzi scheme and it made absolutely no sense”.
“This is what you would expect in any situation where you have things that are not regulated,” he added.
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In recent years, crypto projects “have been valued not by cash flows, not by value creation in the economy, but by what people would pay for them,” Lonsdale said.
FTX, a Bahamas-based crypto exchange, filed for Chapter 11 bankruptcy in early November after reportedly losing at least $1 billion.
Another major crypto company, BlockFi, also announced its bankruptcy last week, following other crypto companies such as 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 mentioned FTX. “In the long run there is a lot of crypto, but most of what we’ve seen in crypto over the last three, four, five years has been a speculative bubble driven by cheap money and driven by a lot of these Ponzi schemes. “
Despite the recent turmoil in the cryptocurrency markets, crypto-based technologies will continue to develop opportunities, according to Lonsdale. Blockchain technology used in cryptocurrencies makes it possible to transfer money online without using traditional government or banking infrastructure, enabling a new and important way to move money around the world, Lonsdale said.
“It makes sense to have more decentralized power and for something like Bitcoin to exist,” he said. “It has helped people get money from Russia, from Venezuela, from China.”
“It gives the financial system more freedom from really bad governments,” Lonsdale continued.
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Blockchain technology will still be an important part of the future, the venture capitalist said.
“This ecosystem, in the long run, I think some of these things are going to be useful to the world,” he said. “But that’s not all we’re seeing now.”
Click here to watch the full interview with Joe Lonsdale about the future of crypto.