Terra Founder Do Kwon Fails to Stimulate UST, LUNA Revival
- Terra Founder Do Kwon broke his silence and addressed the Terra Community on Twitter.
- He said TFL supports a proposal to allow the Terra blockchain to absorb the supply of UST more quickly.
- LUNA and UST markets were unenthused by his comments and continue to trade at depressed levels.
Crypto markets had been waiting for nearly 20 hours for him to announce an alleged “recovery plan,” as promised in a tweet on Tuesday.
Kwon addresses the Terra community
In a new tweet thread on Wednesday, he said “I understand the last 72 hours have been extremely tough on all of you,” before reassuring the Terra community to “know that I am resolved to work with every one of you to weather this crisis, and we will build our way out of this. Together.”
2/ I understand the last 72 hours have been extremely tough on all of you – know that I am resolved to work with every one of you to weather this crisis, and we will build our way out of this.
— Do Kwon 🌕 (@stablekwon) May 11, 2022
“Before anything else, the only path forward will be to absorb the stablecoin supply that wants to exit before $UST can start to repeg,” he explained.
As a result, he said that Terraform Labs (TFL) “endorses the community proposal 1164,” a proposal that will essentially allow the Terra blockchain to absorb the supply of UST more quickly.
“Naturally,” he said, “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.”
He said other community proposals would also be discussed.
Kwon went on to promise that, as UST is rebuilt, its collateralization mechanism will be adjusted and finished his thread with an attempt to sure up sentiment within the Terra community.
“The Terra ecosystem is one of the most vibrant in the crypto industry, with hundreds of passionate teams building category-defining applications within,” he said. “As long as these builders, TFL among them, continue to build – we will come out of this together.”
UST, LUNA markets not impressed
Kwon’s “recovery plan” has failed to inspire any meaningful recovery in the price of Terra’s flagship algorithmic stablecoin UST. It continues to trade at depressed levels in the $0.30, at the time of writing, as the start of the US trading session approaches.
Meanwhile, the flood of UST supply, which according to Terra’s mint-burn mechanism is subsequently converted into a flood of LUNA supply, continues to weigh heavily on the token. It recently fell back below the $2.0 mark, its lowest level since February 2021.
LUNA/USD has lost over 97% of its worth since the start of the week when it was trading close to $65 per token and is down over 98% since its record high near $120 printed at the start of last month.
So long as there is a backlog of UST to be converted into LUNA (where it will almost inevitably be sold immediately after conversion), the selling pressure on LUNA is unlikely to ease.
With UST now trading so far below its peg, the only hope that many UST holders will have of redeeming the equivalent amount in actual US dollars is by using Terra’s mint-burn mechanism to convert the UST into the same USD amount of LUNA and then sell it immediately.