Terra highlighted that they would stake USD 200 million worth of LUNA on recovering the value of UST. The cryptocurrency has devalued massively over the last few days, going from above USD 80 to below USD 1.
After the price of the assets of Terraform Labs plummeted, a proposal emerged to try to address the issue. Terra said that they plan to burn a significant amount of TerraUSD (UST) to restore the balance of the stablecoin.
It Is Necessary to Stop the Devaluation of UST
Terra raises the need to reduce the number of existing UST coins to balance the value of the stablecoin. They noted that they expect that to happen while they expand the pooled fund and face the excess supply in the market.
Do Kwon, the CEO of Terraform Labs, is moving forward with proposal 1164, which has received over 220,000 votes. In the first place, Terra plans to burn around USD 1.4 million worth of UST to rescue the price of those coins.
The Users of UST Will Receive an Incentive
Even though the representatives of Terra agreed to burn UST, they have other strategies in mind. They said they would need to quickly wipe out all the unpayable debt caused by the depreciation of those assets.
The official Twitter account of Terra stated that the main obstacle is wiping out uncollectable debt from the UST in circulation. They said that they would have to do it fast enough for the system to restore the health of the differentials in the chain.
Bearing that in mind, Terra plans to burn coins with the Agora proposal, which consists of cutting 11% of outstanding UST liabilities. In addition, they pointed out that they would address the existing devaluation with a new staking process in the LUNA market.
In that regard, the initiative will have a capital of 240 million LUNA, equivalent to around USD 200 million. Terra highlighted that they would stake that amount on reinforcing the influence of the asset. However, some analysts are doubtful about the effectiveness of that proposal, as they consider it not to be enough.
The Price of LUNA Plummets
The market has witnessed that LUNA has suffered a massive devaluation over the last few days. Its price went from being above USD 80 to bottoming out at less than USD 1.
Volatility took over the expectations of traders, giving way to a wave of selling that would not stop until the next day. Likewise, investors distrust impacted the UST price, leading it to lose the balance that characterizes stablecoins.
The irregularities observed raise suspicions that Terra plans to burn part of its coins following attacks from its competitors. However, all would be mere rumors as UST struggles to recover from the low of USD 0.31 on May 11th.
LUNA is trading at around USD 0.000179 and has accumulated an 824.5% gain over the last 24 hours. While its daily trading volume is above USD 1.41 billion, its market capitalization is about USD 1.14 billion, according to CoinGecko.
By Alexander Salazar
