LUNA has fallen more than 90% in the past 24 hours, while UST remains more than 54% off its peg to the dollar at $0.43 .
Terraform Labs CEO Do Kwon explained how the cryptocurrency platform plans to handle the US dollar depeg that has hit stablecoin TerraUSD (UST) over the past few years.
UST, an algorithmic stablecoin whose minting pattern is pegged to the native LUNA token, continued to massively decouple from its dollar peg on Tuesday. At one point, the UST token stood at $0.25, down 75% from the peg.
On Tuesday, Do Kwon said a “bailout plan” was being considered, a move that followed failed attempts to raise the peg using Bitcoin reserves.
On Wednesday, the head of Terraform Labs explained via a tweet thread which was set after a brutal 72 hours for the stablecoin and LUNA.
» I understand that the last 72 hours have been extremely difficult for all of you – know that I am committed to working with each of you to overcome this crisis, and we will get through this. Whole “, he tweeted.
Way forward for UST and LUNA
According to Kwon, there is a need to first absorb the UST supply looking to exit the ecosystem before further action helps establish a path to the peg. This, he notes, will likely continue to put pressure on LUNA, which incidentally is down more than 90% at the time of writing.
» Before anything else, the only way forward will be to absorb the stablecoin supply that wants out before the UST can start repeg. There’s no way around it ” , does he have Explain .
He noted that the Terraform Labs team came up with ” several corrective measures to help the ankle mechanism absorb the supply “.
Among these measures is the teams’ approval of a community proposal to increase the strike capacity from $293 million to $1,200 million. With more LUNAs hit, the absorption of the UST will happen faster and help the recovery plan.
He added, however, that these measures come at a cost to Terra token holders.
» Naturally, this comes at a high cost to UST and LUNA holders, but we will continue to explore various options to bring more exogenous capital into the ecosystem and reduce the excess supply of UST. “, he wrote.
Kwon also did hint to a redesign of the UST stablecoin, with future plans being to make it collateralized.
LUNA down 92%
On May 11, the UST token traded as low as $0.25, detaching the dollar by 75%. A brief relief in the crypto market sent the stablecoin up to $0.50, but the pressure dragged it down to $0.43 and over 54% against the dollar.
LUNA was down 92% in the last 24 hours at the time of writing. According to data from CoinGecko, the LUNA/USD pair was trading around $2.20 as a panicked community continues to wonder what’s next.
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Terraform Labs CEO outlines his plans to help UST
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