Do Kwon, one of the co-founders of the Terra blockchain and the Luna Foundation Guard (LFG), has broken his silence amidst the massive selloff which has seen the native token of the blockchain, LUNA, lose over 90% of its value in less than a week and its native programmable stablecoin, losing its peg to trade as low as 25 cents.
As a result of general market sell-off we have seen in the market for over a week, as Bitcoin traded below $30,000, a price point not traded since May 2021 and also as a result of how the UST programmable stablecoin works, it caused a massive decline in LUNA, the depegging of the stablecoin, UST and also the over 70% decline in Anchor Protocol’s native token, ANC.
In the last seven days of trading, LUNA has lost its position as a top 10 cryptocurrency by market capitalization as it currently ranks #28 as of the time of this writing. Its token price traded $87.96 a week ago, to currently stand at $4.86 as of the time of this writing, which represents an over 90% decline in just seven days.
What Do Kwon is saying
Do Kwon did a Twitter trend explaining the way forward for the LUNA native token, its programmable stablecoin and the Terra blockchain as a whole.
He stated, “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. Together.
- “A review of the current situation: UST is currently trading at 50 cents, a significant deviation from its intended peg at $1. The price stabilization mechanism is absorbing UST supply (over 10% of total supply), but the cost of absorbing so much stablecoins at the same time has stretched out the on-chain swap spread to 40%, and Luna price has diminished dramatically absorbing the arbs.
- “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. We propose several remedial measures to aid the peg mechanism to absorb supply: 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://station.terra.money/proposal/1164. This should allow the system to absorb the UST more quickly.
- “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. 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.
- “As we begin to rebuild UST, we will adjust its mechanism to be collateralized. The Terra ecosystem is one of the most vibrant in the crypto industry, with hundreds of passionate teams building category-defining applications within. As long as these builders, TFL among them, continue to build – we will come out of this together.
- “Terra’s focus has always oriented itself around a long-term time horizon, and another setback this May, similar to last year, will not deter the #LUNAtics. Short-term stumbles do not define what you can accomplish. It’s how you respond that matters.”
What you should know
- The Anchor Protocol, the top DeFi platform on the Terra blockchain also saw its community propose a solution to restore the UST peg.
- Anchor is a protocol where the majority of UST staking/borrowing takes place. It has seen its total volume locked (TVL) slump to about $3 billion from almost $18b billion.
- The proposal is called the “Emergency measures for restoring Terra peg.” The proposal aims to lower minimum interest rates to 3.5% and maximum deposit rates to 5.5%.
- The current yield of 18% would be temporarily reduced with a “targeted interest rate of 4%, “according to the proposal.” A depegged UST cannot sustain 18% APY any longer,” according to the post, which refers to the interest rate as an annual percentage yield.
- Reducing the interest rate would prevent the Anchor reserve from depleting and contribute to “stopping the depeg death spiral.”
- Another proposed emergency measure is to increase virtual liquidity for Terra to Luna swaps by a factor of 1,000 to avoid a prolonged UST depeg.
- The protocol’s native token, ANC, has lost 69.33% of its value in the past 24 hours, and is currently trading at $0.261.
pls they have to do something about Luna,if not it we take many peoples Life