Terra founder Do Kwon has revealed a plan to rebuild the project’s ecosystem after LUNA lost his all-time high collapsed 99% below $1 and TerraUSD (UST) lost its dollar peg.
In a Twitter thread, Kwon tells his 532,000 followers that he intends to work with the Terra community to “get through the crisis” and return to original form.
LUNA plummeted to $0.69, more than 99% below its all-time high of $119 after Terra’s UST stablecoin had lost its peg to the dollar. Designed to remain pegged to the US dollar, UST allows holders to redeem 1 UST for $1 worth of LUNA. As UST fell well below the dollar level, massive selling pressure dragged LUNA’s prices lower as aggressive arbitrage became effective.
“The price stabilization mechanism is absorbing UST supply (over 10% of total supply), but the cost of absorbing so many stablecoins at once has stretched the on-chain swap spread to 40%, and Luna price has dropped dramatically on the Arb .
Before anything else, the only way forward is to absorb the stablecoin supply that wants to exit before $UST can start repegging. There’s no way around it.”
Kwon also said the team supports a community proposal to increase UST’s minting capacity from $293 million to $1.2 billion to allow the system to absorb UST more quickly.
In the proposal Kwon is referencing, a community member says the move will likely put further pressure on LUNA in the near future, but will ultimately strengthen the entire system in the long run.
“Allowing more efficient UST burning and LUNA minting will put pressure on LUNA price in the short-term but will be an effective way to get UST back on peg which will eventually stabilize LUNA price.
Yes, billions of UST will be burned and LUNA will be significantly diluted. Nonetheless, there is no limit in LUNA supply, this market mechanism will indeed work to bring stable UST and stable LUNA prices (although likely at a lower price point for LUNA).”
At the time of writing, LUNA is trading at $2.28.
Check the price action
Source: Crypto News Deutsch