the CEO de Terra assures that his team will put in place arrangements to restore the peg of the TerraUSD (UST) against the US dollar. He clarifies that Terra’s stabilization algorithm is still working and the mechanism is absorbing UST’s supply, but the cost of absorbing large amounts of stablecoins at the same time has stretched the exchange spread on the blockchain by Terra by 40%, and the LUNA price has dropped dramatically absorbing the effect of arbitration.
Do Kwon therefore maintains that before any action, the only way forward will be to absorb the supply of UST stablecoins that want to exit before the stablecoin can start the re-peg. According to him, for now, there is no way around this problem.
He assures that several corrective measures are put in place to help the peg mechanism to absorb the supply of UST. The current spread on the blockchain, the peg pressure and the rate of destruction of UST should reduce the oversupply of UST.
“As we begin to rebuild the UST, we will adjust its collateralization mechanism. »
LUNA seems dead, but UST peg could be reinstated
LUNA fell to all-time lows at around $0.1. Yet, before this drama, it was among the cryptos that were still maintaining an uptrend in 2022. Do Kwon’s words suggest a re-peg (perhaps without the LUNA) of the UST in the future.
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Currently at $0.5, the unstablecoin could therefore rise by 100% and we can speculate on that. As for LUNA, its price is currently so low that it too could go up if the UST peg is restored.