More crypto companies will fall into Ponzi bankruptcy, but cryptocurrency will remain a crucial tool for exchanging funds globally, a venture capitalist told Fox News.
“Overall, I think you’re going to have mostly crashes,” said Joe Lonsdale, an investor and co-founder of software company Palantir. Various cryptolenders, cryptotokens and other parts of the ecosystem were “a Ponzi scheme and it made no sense at all.”
“This is what you would expect in any situation where you have things that are not regulated,” he added.
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Over the past few 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,”[ads1]; Lonsdale said.
FTX, a Bahamas-based crypto exchange, filed for Chapter 11 bankruptcy in early November after 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 in Chapter 11 proceedings.
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Some companies that have declared bankruptcy “have had a lot of corruption,” Lonsdale said, although he named only FTX. “Long term, there’s a lot of crypto, but most of what we saw in crypto over 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 to develop more opportunities, according to Lonsdale. Blockchain technology used in cryptocurrencies allows funds to be transferred online without using traditional government or banking infrastructure, enabling a new and important way to move money globally, Lonsdale said.
“It makes 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 gives more sort of freedom for the financial system from really bad-acting governments,” Lonsdale continued.
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Blockchain technology will continue to be an important part of the future, the venture capitalist said.
“This ecosystem, long term, I think you’re going to have some of these things emerge as useful to 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.