Terra’s CEO, Kwon Do, reappeared early Wednesday and announced an emergency plan to save UST and LUNA.
To protect against network governance attacks, it is proposed that businesses burn all USTs in the community pool, burn the remaining 371 million USTs on Ethereum cross-chain, and stake 240 million LUNA.
Terra plans to save LUNA and UST.
The Terra Money Twitter account is an additional depth into Terraform Labs CEO’s UST structure plan. Tweet thread.
Kwon said in his tweet series:
“Above all, the only way forward is to absorb the stablecoin supply that $UST wants to close before it pegs it. There is no way. With current on-chain spreads, fixed pressures, and UST burn rates, the supply overhang of UST (i.e. bad debt) should continue to decline until parity is reached and the spread begins to heal. Naturally, this will be expensive for UST and LUNA holders, but we will continue to explore different options to bring more exogenous capital to the ecosystem and reduce oversupply for UST.”
Proposal 1164, Starting May 11th, Do Kwon’s unique Terra approach will be discussed in this thread. This idea will improve the balance of the algorithmic stablecoin UST by increasing the underlying pool of currency. that much proposal 220,000 votes or more than half of the total. The proposal won 49% of the votes abstained, with the remaining minority against. It will be over in 6 days.
To save the network, Terraform Labs has recommended several additional “emergency measures”. All UST remaining in Terra’s community pool, an additional 371 million UST currently stored in Ethereum, and 240 million LUNA tokens will be burned to protect the network from system attacks.
Read Related | How Terra uses its Bitcoin holdings to keep UST stable
Terra’s algorithmic stablecoin, UST, lost peg and was bearish this week. The UST plans to follow the dollar, but it reached a low of $0.30 on Wednesday and remains below the $0.50 peg.
Terra’s volatile coin, LUNA, isn’t looking any better. Currently trading below $0.05, it is down 99.9% this week. The price peaked at $119 just five weeks ago. The decline has been dubbed “the sharpest and most brutal thing in cryptocurrency history” and has serious implications for the rest of the market.
LUNA Market Cap has crashed from $37 Billion to $245 Million. Source: TradingView
Several important assets were down today, with Ethereum losing 20% and Solana and Cardano losing more than 30% of their value. As speculators rushed to abandon the market, USDT lost its peg against the US dollar, temporarily dropping to $0.95. Despite the free-flowing market, no project faces a greater challenge than Terra.
The company hopes to stake 240 million LUNA to boost Terra’s economy and avoid governance threats.
All three moves will help resolve the system’s on-chain swap spreads, which could peg the UST once again.
According to Terra Analytics, LUNA’s circulation increased by 4.355 billion units as of May 12th. Also, over 1 billion have been issued in the last two hours.
Terra under SEC investigation?
The U.S. Securities and Exchange Commission (SEC) is reportedly starting an investigation into Terra’s UST stablecoin, despite Treasury Secretary Janet Yellen’s public criticism of the risk.
“The stablecoin known as TerraUSD has plummeted and has lost value,” Yellen testified before the Senate earlier this week. “This simply shows that this is a fast-growing product and that there is a risk to our financial stability.”
LUNA Plunges. Source: TradingView
The SEC may have been called when the UST depinned from the US dollar and the LUNA price fell in just two days. The SEC may also be asked to investigate due to the involvement of money managers and the potential for a joint attack on the blockchain.
Read Related | LUNA sank as Binance stopped withdrawing tokens amid market turmoil.
Featured image from Getty Images, chart from TradingView.com, and Bloomberg