{"id":61313,"date":"2022-05-11T18:53:03","date_gmt":"2022-05-11T15:53:03","guid":{"rendered":"https:\/\/forklog.com\/en\/?p=61313"},"modified":"2025-09-05T11:27:37","modified_gmt":"2025-09-05T08:27:37","slug":"terraform-labs-ceo-outlines-plan-to-rescue-ust-as-luna-tumbles-below-1","status":"publish","type":"post","link":"https:\/\/u1f987.com\/en\/terraform-labs-ceo-outlines-plan-to-rescue-ust-as-luna-tumbles-below-1\/","title":{"rendered":"Terraform Labs CEO outlines plan to rescue UST as LUNA tumbles below $1"},"content":{"rendered":"<p>Terraform Labs chief Do Kwon unveiled a plan to restore the price of the algorithmic stablecoin UST. Against this backdrop, LUNA breached the $1 mark.<\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">2\/ I understand the last 72 hours have been extremely tough on all of you \u2014 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. <\/p>\n<p>Together.<\/p>\n<p>\u2014 Do Kwon \ud83c\udf15 (@stablekwon) <a href=\"https:\/\/twitter.com\/stablekwon\/status\/1524331172859236353?ref_src=twsrc%5Etfw\">May 11, 2022<\/a><\/p><\/blockquote>\n<p> <script async=\"\" src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>As of writing, UST was trading around $0.50. In the last 24 hours it had fallen 46% (<a href=\"https:\/\/www.coingecko.com\/\">CoinGecko<\/a>).<\/p>\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/lh4.googleusercontent.com\/ynUkBAA2qTcqJZGydFG-mNJYo5QEeqfnJRTMQzR8x50yCtAe6nD1iP2C9RpSmVX_A5cZusYuFJfXIhZiOkV2JroDGFWU_CGond9pavXz_qAFTzCKIfVrloYHLkqFWI7tszGnqq-5yxQc0_2cPg\" alt=\"Terraform Labs CEO outlines plan to rescue UST. LUNA price fell below $1\"\/><figcaption>Hourly chart of UST\/USD on Coinbase. Data: TradingView.<\/figcaption><\/figure>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p>\u201cThe price-stabilising mechanism is absorbing UST supply (over 10% of the total supply), but absorbing such a volume of stablecoins has widened the swap spread on the network to 40%, and the price of LUNA has fallen sharply,\u201d Kwon noted.<\/p>\n<\/blockquote>\n<p>He said the necessary step before taking further measures would be to absorb the supply of UST holders who wish to exit the asset.<\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">6\/ Before anything else, the only path forward will be to absorb the stablecoin supply that wants to exit before <a href=\"https:\/\/twitter.com\/search?q=%24UST&#038;src=ctag&#038;ref_src=twsrc%5Etfw\">$UST<\/a> can start to repeg. There is no way around it. <\/p>\n<p>We propose several remedial measures to aid the peg mechanism to absorb supply:<\/p>\n<p>\u2014 Do Kwon \ud83c\udf15 (@stablekwon) <a href=\"https:\/\/twitter.com\/stablekwon\/status\/1524331181184983040?ref_src=twsrc%5Etfw\">May 11, 2022<\/a><\/p><\/blockquote>\n<p> <script async=\"\" src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>The plan envisages accelerating LUNA issuance. Under the mechanism, 1 UST should be exchangeable for $1 in LUNA at any moment. In Kwon&#8217;s view, this \u201cwill allow the system to absorb UST faster.\u201d<\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">7\/ 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. <a href=\"https:\/\/t.co\/aqNKzYK2xC\">https:\/\/t.co\/aqNKzYK2xC<\/a><\/p>\n<p>This should allow the system to absorb the UST more quickly.<\/p>\n<p>\u2014 Do Kwon \ud83c\udf15 (@stablekwon) <a href=\"https:\/\/twitter.com\/stablekwon\/status\/1524331183261163520?ref_src=twsrc%5Etfw\">May 11, 2022<\/a><\/p><\/blockquote>\n<p> <script async=\"\" src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p>\u201cOf course, UST and LUNA holders will bear substantial costs, but we will continue to explore various options to attract external capital into the ecosystem and reduce UST&#8217;s oversupply,\u201d he added.<\/p>\n<\/blockquote>\n<p>After restoring the peg, Kwon pledged to use a collateralized mechanism.<\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">12\/ As we begin to rebuild UST, we will adjust its mechanism to be collateralized.<\/p>\n<p>\u2014 Do Kwon \ud83c\udf15 (@stablekwon) <a href=\"https:\/\/twitter.com\/stablekwon\/status\/1524331190995484672?ref_src=twsrc%5Etfw\">May 11, 2022<\/a><\/p><\/blockquote>\n<p> <script async=\"\" src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>Against the plan&#8217;s publication, LUNA quotes plunged below $1. The price briefly hovered around $0.80; at the time of writing, the rate had moved to above $2 (Binance). According to CoinGecko, the asset had lost 97.5% over the past 24 hours.<\/p>\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/lh3.googleusercontent.com\/elu9FAou6paTNekX0tfgD6Gv0DmL4IGukn5mGX3Yz4LhjngaDOK6YS7dSNWwSlmBJ86P_Pa2H8V5ZtpE_cjo6n6KxghcXQcocYo555N9bXvb98RnQ3EvRCvoAnyLBvNfY2uwtWeGJB4mlOaJKw\" alt=\"Terraform Labs CEO outlines plan to rescue UST. LUNA price fell below $1\"\/><figcaption>Hourly chart of LUNA\/USD on Binance. Data: TradingView.<\/figcaption><\/figure>\n<p>The model for preserving parity with the dollar largely relies on arbitrageurs. If the stablecoin&#8217;s price falls below $1, traders can buy it and redeem it for $1 in LUNA, pocketing a profit.<\/p>\n<p>For the mechanism to work, there must be demand for the target asset. In the case of UST, the platform is Terra&#8217;s largest protocol\u2014Anchor. In the wake of the collapse of the stablecoin and LUNA, ANC&#8217;s price dropped 71.3% over the past 24 hours.<\/p>\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/lh5.googleusercontent.com\/unsfi4SBBXRyn0NRwGYew-KZdV5TuFI179BblEhTCNoNAWuspXJ7U3Yg2VSQZmQ8GbZ0i6HtPa5fzbfpaauB9gvHkJMqvpdx-4olwgpjoIh1cKuKnzqln8Ab5lUmKcjztq0JhWiGmV359f0Sww\" alt=\"ANC price chart\" \/><figcaption>Hourly chart of ANC\/USDT on Binance. Data: TradingView.<\/figcaption><\/figure>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p>\u201cANC price plunged due to loss of trust in UST and the Terra ecosystem as a whole following the de-pegging of the stablecoin to the dollar,\u201d Idan Au, Director of Research at The Block Research, said.<\/p>\n<\/blockquote>\n<p>The sharp drop in LUNA prompted responses from several South Korean exchanges. Coinone, part of the &#8220;big four,&#8221; paused trading of the asset, while Korbit and Bithumb issued investor warnings.<\/p>\n<p>According to Messari&#8217;s analysts, the first \u201cfallen domino\u201d in the UST saga was Luna Foundation Guard (LFG) <a href=\"https:\/\/u1f987.com\/en\/news\/luna-foundation-guard-adds-37863-btc-worth-1-5-billion\">37 863 BTC for a total of about $1.5 billion<\/a> on May 5. The deal was executed off the exchange, with Genesis Global Trading and Three Arrows Capital acting as intermediaries.<\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p>\u201cSaturday [May 7] marked the start of the UST de-pegging cascade. Binance experienced a slight 25 basis-point depeg, likely because Three Arrows Capital and Genesis Global Trading dumped their UST from the LFG,\u201d the thread says.<\/p>\n<\/blockquote>\n<p> <script async=\"\" src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">3\/ Saturday marked the start of the $UST de-pegging cascade. <a href=\"https:\/\/twitter.com\/binance?ref_src=twsrc%5Etfw\">@binance<\/a> experienced a slight 25 bps depeg May 7, likely due to 3AC and <a href=\"https:\/\/twitter.com\/GenesisTrading?ref_src=twsrc%5Etfw\">@GenesisTrading<\/a> unloading their <a href=\"https:\/\/twitter.com\/ust?ref_src=twsrc%5Etfw\">@UST<\/a> from the <a href=\"https:\/\/twitter.com\/LFG_org?ref_src=twsrc%5Etfw\">@LFG_org<\/a> <a href=\"https:\/\/twitter.com\/search?q=%24BTC&#038;src=ctag&#038;ref_src=twsrc%5Etfw\">$BTC<\/a> purchases.<\/p>\n<p>\u2014 Messari (@MessariCrypto) <a href=\"https:\/\/twitter.com\/MessariCrypto\/status\/1524212184699576320?ref_src=twsrc%5Etfw\">May 11, 2022<\/a><\/p><\/blockquote>\n<p> <script async=\"\" src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>Analysts noted that with such an outflow of supply, pressure would be exerted at critical peg-stabilisation points, notably at Curve Finance.<\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p>\u201cIn a broader market sell-off, a large and sudden appearance of UST supply created reflexive selling pressure on LUNA, culminating in the loss of the peg to the dollar,\u201d Messari added.<\/p>\n<\/blockquote>\n<p>On May 11, a Twitter user drew attention to a memo to Arca&#8217;s investors, apparently drafted before May 11. It disclosed recent investments in LUNA.<\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p>\u201cLUNA was and remains a core position in our digital assets fund. UST is our main stablecoin, which we continue to use in the Digital Yield Fund,\u201d said Arca CEO Rain Steinberg.<\/p>\n<\/blockquote>\n<p>According to him, over the past weekend analysts conducted a study and concluded that UST should recover. On Monday, May 9, the firm&#8217;s Risk and Investment Committee decided to continue to adhere to this view.<\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p>\u201cWe firmly believe that the price-support mechanisms are functioning as planned and can withstand periods of extreme stress,\u201d the letter states.<\/p>\n<\/blockquote>\n<p>Earlier, The Block sources reported plans by LFG to raise $1 billion to stabilise the peg. According to Miki Honkasalo, the publication&#8217;s analyst, this attempt failed.<\/p>\n<p>As ForkLog reported in a recent exclusive, Anchor&#8217;s problems could undermine Terra&#8217;s economy and the cryptocurrency markets.<\/p>\n<p>Subscribe to ForkLog&#8217;s news on Telegram: <a href=\"https:\/\/t.me\/forklogfeed\" target=\"_blank\" rel=\"nofollow noopener\">ForkLog Feed<\/a> \u2014 the full news stream, <a href=\"https:\/\/telegram.me\/forklog\" target=\"_blank\" rel=\"nofollow noopener\">ForkLog<\/a> \u2014 the most important news, infographics and opinions.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Terraform Labs chief Do Kwon unveiled a plan to restore the price of the algorithmic stablecoin UST. Against this backdrop, LUNA breached the $1 mark.<\/p>\n","protected":false},"author":1,"featured_media":61314,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"select":"1","news_style_id":"1","cryptorium_level":"","_short_excerpt_text":"","creation_source":"","_metatest_mainpost_news_update":false,"footnotes":""},"categories":[3],"tags":[807,852],"class_list":["post-61313","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news-and-analysis","tag-stablecoins","tag-terra"],"aioseo_notices":[],"amp_enabled":true,"views":"22","promo_type":"1","layout_type":"1","short_excerpt":"","is_update":"","_links":{"self":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts\/61313","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/comments?post=61313"}],"version-history":[{"count":1,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts\/61313\/revisions"}],"predecessor-version":[{"id":61315,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts\/61313\/revisions\/61315"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/media\/61314"}],"wp:attachment":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/media?parent=61313"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/categories?post=61313"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/tags?post=61313"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}