The price of Luna, the native token of Terra, is now as volatile as low-cap meme currencies, and is currently up 23,851 percent from its all-time low set on Friday, May 13, as per CoinGecko data. As the market slowly gained clarity on what transpired, the trading volume of LUNA saw a steep recovery over the weekend. Terraform Labs CEO and co-founder Do Kwon sought damage control on Friday as he proposed a revival plan for Terra’s comeback, which involves compensating UST and LUNA holders for holding the tokens during the crash.
Last week, Luna saw its largest sell-off yet, after UST, the algorithmic stablecoin created by Terra, fell below the $1 (roughly Rs. 77) peg, plummeting to $0.22 (roughly Rs. 17) on May 11. The de-peg allegedly came as a result of some big crypto investors dumping the stablecoin for “safer assets” fearing that Terra’s plan to back UST using Bitcoin could backfire.
The situation was further worsened by other stablecoins including Tether (USDT) sinking as low as 95 cents on some exchanges Thursday, alleviating the ongoing “speculation driven fear.”
“While UST has been the central narrative of Terra’s growth story over the last year, the Terra ecosystem and its community is what is worth preserving,” Kwon wrote in a post on a Terra discussion forum on Saturday, adding the Terra community “must reconstitute the chain to preserve the community and the developer ecosystem.”
The ‘reconstitute’ — effectively a restart of the Terra blockchain — would create 1 billion tokens to be distributed among various community stakeholders, with 40 percent going to LUNA holders before the UST de-pegging, 40 percent to go to UST holders “pro-rata at the time of the new network upgrade,” 10 percent to LUNA holders before the chain halt, and 10 percent to the “Community Pool to fund future development.”
While investors appear to have been somewhat convinced by Kwon’s recovery plan, Binance CEO Changpeng “CZ” Zhao tweeted in reply that this plan would not work, calling it “wishful thinking.”
Personal opinion. NFA.
This won’t work.
– forking does not give the new fork any value. That’s wishful thinking.
– one cannot void all transactions after an old snapshot, both on-chain and off-chain (exchanges).
Where is all the BTC that was supposed to be used as reserves? https://t.co/9pvLOTlCYf
— CZ ???? Binance (@cz_binance) May 14, 2022