Terra 'rescue plan' still unclear, Luna & UST plunges
Luna co-founder Do Kwon has released a statement on twitter about the future plan for recovering Terra.
6/ Before anything else, the only path forward will be to absorb the stablecoin supply that wants to exit before $UST can start to repeg. There is no way around it.
— Do Kwon 🌕 (@stablekwon) May 11, 2022
We propose several remedial measures to aid the peg mechanism to absorb supply:
7/ First, we endorse the community proposal 1164 to Increase basepool from 50M to 100M SDR *) Decrease PoolRecoveryBlock from 36 to 18 This will increase minting capacity from $293M to ~$1200M. https://t.co/aqNKzYK2xC
— Do Kwon 🌕 (@stablekwon) May 11, 2022
This should allow the system to absorb the UST more quickly.
9/ With the current on-chain spread, peg pressure, and UST burn rate, the supply overhang of UST (i.e., bad debt) should continue to decrease until parity is reached and spreads begin healing.
— Do Kwon 🌕 (@stablekwon) May 11, 2022
11/ Naturally, this is at a high cost to UST and LUNA holders, but we will continue to explore various options to bring in more exogenous capital to the ecosystem & reduce supply overhang on UST.
— Do Kwon 🌕 (@stablekwon) May 11, 2022
Soon after the statement was released both UST and LUNA showed some momentum but as time passed it fails to hold. At the time of this article, UST is trading at $0.44 and at one time has fallen to $0.22, LUNA on other hand is trading at $2.74.
The effect of this on Bitcoin and Altcoins seems to be faded away as of now, BTC is trading around ~$32000.
Future doesn't look good for the Luna community as after nearly 72 hours, UST failed to re-peg to USD and with each passing minute level of trust is decreasing.
What will be the wider implication of this debacle on the whole crypto community is a thing to see in the upcoming days.