Terra founder Do Kwon has revealed a plan to rebuild the challenge’s ecosystem following LUNA’s 99% collapse from its all-time excessive to under $1 and TerraUSD (UST) dropping its greenback peg.
In a Twitter thread, Kwon tells his 532,000 followers that he intends to work with the Terra group to “climate the disaster” and get again to authentic kind.
LUNA crashed to $0.69, greater than 99% down from its all-time excessive of $119 after Terra’s UST stablecoin misplaced its peg to the greenback. UST was designed to remain pegged to the US greenback and permits holders to redeem 1 UST for $1 price of LUNA. When UST dipped effectively under the greenback mark, large quantities of sell-pressure dragged down LUNA’s costs as aggressive arbitrage took impact.
“The worth stabilization mechanism is absorbing UST provide (over 10% of complete provide), however the price of absorbing a lot stablecoins on the similar time has stretched out the on-chain swap unfold to 40%, and Luna value has diminished dramatically absorbing the arbs.
Earlier than the rest, the one path ahead will likely be to soak up the stablecoin provide that desires to exit earlier than $UST can begin to repeg. There is no such thing as a means round it.”
Kwon additionally mentioned the group endorsed a group proposal to extend UST’s minting capability from $293 million to $1.2 billion with the intention to permit the system to soak up UST faster.
Within the proposal that Kwon references, a group member says that the transfer will in all probability put additional strain on LUNA within the close to future, however finally strengthen your complete system over the long run.
“Permit extra environment friendly UST burning and LUNA minting, will within the quick time period put strain to LUNA value, however will likely be an efficient method to carry UST again to peg, which is able to finally stabilize LUNA value.
Sure, billion of UST will likely be burned, and LUNA will likely be diluted considerably. Nonetheless, there are not any limits in LUNA provide, this market mechanism will truly work to carry secure UST and secure LUNA value (though possible at cheaper price level for LUNA).”
At time of writing, LUNA is buying and selling for $2.28.
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