Terra founder Do Kwon has revealed a plan to rebuild the mission’s ecosystem following LUNA’s 99% collapse from its all-time excessive to beneath $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 unique type.
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 beneath the greenback mark, large quantities of sell-pressure dragged down LUNA’s costs as aggressive arbitrage took impact.
Says Kwon,
“The worth stabilization mechanism is absorbing UST provide (over 10% of complete provide), however the price of absorbing a lot stablecoins on the identical time has stretched out the on-chain swap unfold to 40%, and Luna value has diminished dramatically absorbing the arbs.
Earlier than anything, the one path ahead will probably be to soak up the stablecoin provide that desires to exit earlier than $UST can begin to repeg. There isn’t any manner round it.”
Kwon additionally stated the staff endorsed a group proposal to extend UST’s minting capability from $293 million to $1.2 billion as a way to enable 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 stress on LUNA within the close to future, however finally strengthen your entire system over the long term.
“Permit extra environment friendly UST burning and LUNA minting, will within the brief time period put stress to LUNA value, however will probably be an efficient strategy to deliver UST again to peg, which is able to finally stabilize LUNA value.
Sure, billion of UST will probably be burned, and LUNA will probably be diluted considerably. However, there aren’t any limits in LUNA provide, this market mechanism will really work to deliver steady UST and steady LUNA value (though doubtless at cheaper price level for LUNA).”
At time of writing, LUNA is buying and selling for $2.28.
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