Luna Recovery: Will Luna Recover After Do Kwon Reveals Terra Recovery Plan?


Luna Recovery: TerraForm Labs CEO Do Kwon announces recovery plan for LUNA, UST following crash

Luna Recovery: Will Luna Recover After Do Kwon Reveals Terra Recovery Plan?

Holders are left wondering if a Luna recovery is feasible following the crypto catastrophe that saw Luna and TerraUSD plummet.

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Do Kwon, the founder, and CEO of TerraLabs proposed a Luna recovery strategy to help stabilize the present crypto wreckage.

Here's a peek at Kwon's Luna recovery plan, which has been dubbed one of the largest cryptocurrency collapses ever, with Luna dropping over 99 percent and UST losing its peg.

Do Kwon Reveals Recovery Plan for Luna

Kwon used Twitter to reveal the details of his Luna recuperation strategy. He stated that he is now working to stabilize the unprecedented crypto price drop by developing a collateralized UST mechanism.

Tether and USDT are examples of collateral-backed stablecoins, with their prices tied to $1. This is in contrast to algorithmic stablecoins like UST, which have no collateral and rely on computational smart contracts to keep prices stable. To maintain price stability, the technique involves burning and minting UST/LUNA.

Kwon revealed why Luna and UST had plummeted in value. He said in a Twitter thread:

The price stability mechanism is absorbing UST supply (over 10% of total supply), but the expense of absorbing so many stablecoins at once has stretched out the on-chain swap spread to 40%, causing Luna price to plummet.

Kwon provided further information to begin the rehabilitation procedure. "The only way ahead is to absorb the stablecoin supply that wants to go before $UST starts to repeat," he stated.

Kwon advocated raising the basic pool from 50 to 100 million dollars and lowering PoolBlockRecovery from 36 to 18. To assist absorb the UST in circulation, the minting capacity will be increased from $293 million to $1.2 billion. This will aid UST's return to its previous dollar peg.

Later, Do Kwon stated that once the UST ecosystem is stabilized, he would increase attempts to collateralize UST. Terra would implement measures that would make the stablecoin more durable and resistant to market volatility.

He did, however, agree that this would have an impact. "Obviously, this comes at a great cost to UST and LUNA holders," Kwon added. "However, we will continue to investigate other strategies to bring in additional exogenous money to the ecosystem and alleviate the supply overhang on UST."

Is Luna Getting Better?

Luna has not recovered in terms of pricing and is now at an all-time low. Luna is now trading at $0.02, representing a 99.9% drop in the previous few days. Luna's price was roughly $80 at the start of May, for reference.

One reason for the dramatic decline is the scarcity of Luna. There are currently more than 13 billion Luna in circulation, up from 343 million before the catastrophe (via CoinGecko).

Luna's price increased marginally to $4.55 when Kwon announced the recovery but then dropped back down.

However, after losing its peg, TerraUSD has recovered modestly. It is presently trading at $0.59, up 97% from its low of $0.29 on May 11th.


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