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Terra (LUNA) has experienced a historic drop amid the continuing crypto market chaos. Its stablecoin TerraUSD (UST) has also experienced a 45 percent decrease in the last 24 hours. Do Kwon, the founder of Terra, announced plans to support the struggling Terra blockchain on Wednesday. However, his approach is expected to put more downward pressure on LUNA prices.
Kwon stated that the blockchain would mint more LUNA to be sold on the open market in order to collect revenue to save the UST peg. Burning LUNA can also be used to create UST, which is currently trading at a significant discount.
UST is currently selling at 50 cents per dollar, significantly below its 1:1 fixed value. LUNA is also trading at a new low of just over $2.
However, more LUNA will almost certainly make the token to fall even further, as supply surpassing demand is deflationary for pricing. This might cause the price of LUNA to plummet much below $1.
According to Kwon, the only option to absorb the stablecoin supply is for those ready to quit before UST reverts to its previous value.
As the UST peg began to drop earlier this week, the Luna Foundation Guard sold all of its Bitcoin assets in an attempt to beef up the peg. While this brought prices closer to $1 for a short time, it was only temporary because the Bicoin was sold at a substantial discount.
Terra’s critics now claim that the network lacks the liquidity required to support its tokens. Anchor Protocol, its largest DeFi platform, has likewise suffered a mass migration of funds and has fallen out of the top-10 DeFi platforms.