Do Kwon endorsed a community proposal that would increase minting capacity to “absorb UST faster.”
Terra’s governance and staking token has crashed aggressively, losing more than 96% and falling below $1 in the last 24 hours. The sharp drop came after the algorithmic stablecoin of the ecosystem had lost its tie to the after being hit by a massive sell-off.
Meanwhile, Do Kwon, CEO of TerraLabs, recently expressed support for a community proposal aimed at restoring UST’s bond by increasing the ecosystem’s minting capacity.
the market capitalization LUNA was outperformed by UST’s market capitalization
As of May 8, Terra’s algorithmic stablecoin UST, which recently overtook Binance USD () to become crypto’s third-largest stablecoin, lost its dollar peg.
At the same time, a broad market sell-off caused the LUNA market cap to fall below the UST market cap, meaning traders could not redeem UST for LUNA, potentially jeopardizing the very foundation of the entire UST mechanism.
This further escalated market concerns, leading to a run on UST. , where more than 67% of UST tokens were locked, began to see high-volume withdrawals. Over the past two days, more than 8 billion UST has been withdrawn from the log.
As investors drained UST and continuously minted LUNA, traders and speculators were able to . LUNA has lost more than 96% of its value in the last 24 hours and is currently trading around $1, a far cry from its all-time high of $119 recorded just last month.
Do Kwon endorses proposal that can save UST
Do Kwon took to Twitter yesterday to suggest how algorithmic stablecoin UST can be rescued. He noted that the on-chain swap spread has increased to 40% and LUNA’s price has dropped dramatically as the price stabilization mechanism attempts to absorb all selling pressure.
“Before anything else, the only way forward will be to absorb the stablecoin supply that wants to exit before UST can start rescheduling. There’s no way around it.”
He proposed a community proposal that would increase minting capacity to “absorb UST faster.” The proposal, which is currently being voted on, would increase the BasePool from 50M to 100M SDR and decrease the PoolRecoveryBlock from 36 to 18 blocks, bringing the minting capacity from $293M to around $1200M would increase.
“With the current on-chain spread, peg pressure and UST burn rate, UST supply overhang (i.e. bad debt) should continue to decrease until parity is reached and spreads start to heal.”
Do Kwon also warned that the proposal would come at a high cost for UST and LUNA holders. However, he said they will continue to explore various options to “inject more exogenous capital into the ecosystem and reduce UST oversupply.”
At the time of writing, LUNA is resuming its downward move with no sign of bottoming out. The coin is currently just above $1 after briefly falling below it, averaging over 96% over the past 24 hours. The ecosystem’s algorithmic stablecoin UST is trading at $0.39, down 58% over the past day.
Source: Crypto News Deutsch