After hours of silence, Terraform Labs CEO Do Kwon finally announced the latest information about the project’s status.
Specifically, Mr. Do Kwon sent his condolences to community members and investors Terra (LUNA) and stablecoin UST in the last 72 hours, and acknowledged that the UST price has de-peg to 0.5 USD instead of maintaining the inherent level of 1 USD.
Mr. Do Kwon said that when UST de-peg, many investors moved UST to LUNA. The same is true of the balancing mechanism of the UST algorithmic stablecoin, which aims to cut the supply. But in fact, during this time, the amount of conversion was too large, in addition to the strong LUNA dump, causing both of them to fall into a spiral. Therefore, Terra decided to agree with the community’s proposal to accept more Luna mints and reduce the oversupply of UST.
Thus, the new changes of Terraform Labs will essentially sacrifice LUNA to save UST, increase the number of LUNA issued to have money to buy UST from the market, reduce the total supply of UST to a reasonable number, maybe 1-2 billion USD.
Then, Terraform Labs will raise an equivalent amount of money and use that money to secure 1:1 for UST, restoring the $1 price mark for this stablecoin. However, these are just analysts’ guesses and more information on Terraform Labs’ future plans is needed for confirmation.
Prior to that, from May 9 to 10, 2022, about $8 billion in UST was withdrawn from Anchor Protocol. During the same time period, only about $1 billion of UST was burned.