Crypto News

Terra approaches zero and Kwon promises “Return To Form”

Terraform Labs CEO Do Kwon finally resurfaced early Wednesday to announce a contingency plan to rescue. However, that did little to inspire confidence in the collapsing ecosystem.

The central theses

  • Do Kwon, CEO of Terraform Labs, has endorsed a governance proposal to save the Terra ecosystem.
  • The proposal suggests speeding up minting of LUNA to preserve UST binding.
  • LUNA is trading around $1 while UST is down to $0.33.

LUNA has lost over $30 billion in value over the past few days. It is now trading at $1, down 97% in the last 24 hours.

Do Kwon suggests Terra Fix

Do Kwon has submitted a proposal to the Terra community to save the ecosystem, but LUNA .

The CEO of Terraform Labs released a tweetstorm on Wednesday addressing Terra’s ongoing plight and suggesting a way forward for the ailing network. kwon wrote,

our recommendation Terra approaches zero and Kwon promises “Return To Form”, Crypto Trading News

“I am committed to working with each of you to get through this crisis and together we will find our way out of it.”

Noting how UST continues to trade below its intended $1 peg, Kwon explained that Terra’s dual token mechanism supports the algorithmic stablecoin devours. he tweeted,

“The cost of absorbing so many stablecoins at once has widened the on-chain swap spread to 40% and the Luna price has dropped dramatically from the absorption of the arbs. The only way forward will be to absorb the stablecoin supply that wants to exit.”

Terra’s ecosystem is based on the close relationship between LUNA, its ephemeral token, and UST, its algorithmic stablecoin. Terra users can mint 1 UST by burning $1 worth of LUNA, or they can burn 1 UST to mint $1 worth of LUNA. This gives arbitrageurs an incentive to keep UST’s price and theoretically means that it should always trade around $1.

While Terra has enjoyed tremendous success over the past year, in recent days it has faced its biggest stress test yet. After an initial Depeg dip of around $0.98 over the weekend, LUNA and UST have tumbled later this week as confidence in the project wanes. UST is trading at $0.33 at press time, while LUNA is down 97% over the past 24 hours.

It is currently trading at around $1, its lowest since January 2021 (for comparison, LUNA peaked at $119 just five weeks ago). the market capitalization from Terra has plummeted from over $30 billion to about $624 million.

Proposal aims to speed up LUNA Minting

Kwon has advocated a solution that would involve increasing Terra’s daily mining capacity to help UST return to its bond. He pointed out that a proposal to increase minting capacity to $1.2 billion was posted on Terra’s governance forum, with 56.66% of voters representing over 78.4 million LUNA tokens at the time voted in favor at press time (43.34% of voters abstained and no one voted against). ). It has already passed the minimum voting threshold.

If passed, the proposal will allow UST holders to exit their positions by minting LUNA faster than today (current minting capacity is only $293 million). However, this means that LUNA could face even more selling pressure in the near future. The proposal drew attention to the potential pressure and presented the idea that LUNA could eventually stabilize once UST returns to $1. An excerpt read:

“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.”

Kwon also acknowledged that proceeding with the proposal would come at “high costs for UST and LUNA holders,” adding that further ideas would be discussed in the Terra forum.

However the Terra community advances, it faces an uphill battle that few other major crypto projects have had to contend with. While several other algorithmic stablecoin projects have failed in the past, none of them have escalated to such heights only to collapse in such a short amount of time. Just a few weeks ago, LUNA was hitting all-time highs in a market-wide downturn, and Kwon was publicly betting millions of dollars on its long-term success. It is now trading at almost zero.

Despite the bleak outlook for the Terra ecosystem and community, Kwon ended his announcement on a positive note. “Terra’s return to form will be a sight to behold,” he wrote. “We are here to stay. And we will keep making noise.”

Source: Crypto News Deutsch

Related Articles

Leave a Reply

Your email address will not be published.

Back to top button