Luna UST. It’s been an insane week and might get even crazier because there are multiple plans floating around to attempt and revive this entire ecosystem. If you’re a UST or ex-UST holder, I need your help pushing through one of these proposals. So please read this entire article. It is extremely important.
So let’s do a brief recap
The Terra ecosystem has completely collapsed in the last week. Luna, the main token, lost 99.9999% of its value, decimating everyone. The YouTuber KSI posted on this how his $2.8 million investment into Luna turned into $1,000. And honestly, as of the writing of this, that $1,000 is likely worth less than $1. As Luna’s token prices, it’s looking like a meme coin at this point.
And then we have UST, the stablecoin, that’s backed by the Terra network. This one is especially sad to me. It’s supposed to be worth a dollar, a safe haven from crypto volatility. And of course, that didn’t happen. UST has only tumbled further and further and is now floating around $0.10. It’s just disappointing and somehow just feels wasteful. Like every dollar invested in the UST was just a complete waste.
At least with Luna, you go into it thinking maybe this will 2X, maybe it’ll 5X, but you know that there’s ultimately a fairly high risk. No one buys a stablecoin hoping for a 5X. And if you do, you don’t know what a stablecoin is. I guess the whole thing has just been gross. It’s the best way to describe it’s just been gross. My heart goes out to literally every single person who’s been impacted. This has been insane.
I’ve heard the stories. The stories are just horrendous of the people who have been impacted by all this. So Terra tried to get UST back to the $1 peg. How they did this was by hyperinflating the supply of Luna printing more and more tokens.
Here’s their supply graph. This isn’t a mistake. It’s literally a right angle. This plan didn’t work and honestly just hurt everyone, holding Luna even more and decimating literally anyone who bought the token as it was going down again even more waste. This entire story is just waste after waste. So of course I was involved in UST and was burned by this entire ordeal. But I do have a quick story.
The last few days have been probably some of the worst of my life and I’ve been looking for ways to profit during all this chaos since I know that chaos breeds opportunity. So I’ve been reading and researching all week and I noticed something. I noticed that some DEXes were slow to reprice the USD token, meaning that there could be an opportunity to buy it somewhere and sell it elsewhere at a higher price than rinse and repeat. Potentially, I’ll make my money back.
Most of the time, this opportunity would be around a 3% price difference, too high a risk to try to do anything quickly. It just wouldn’t be worth it. But at one point, UST was literally trading for $0.05, and I found a DEX listing the same token at $0.20. So UST for $0.20, meaning I could buy UST and literally 4X my money basically recovering my losses instantly. So really quickly I get a little bit of UST to do a test, like $20 worth.
I go to do the transfer and they shut down the network seconds before I could do it. By the time the network was back open, the opportunity was gone. So close. But the point is, keep your eyes peeled for opportunities and let me know if you find anything. But this is when I start looking into what Terra can actually do to try and save this entire mess.
Now, before we get into that, I feel obligated to dispel a rumor. In my last two articles, I said that there were whispers that Citadel and BlackRock were a major catalyst for Luna and UST crashing after loaning Bitcoin from Gemini. I had said that these were unconfirmed rumors, but I felt the need to report everything currently being said because there was so much chaos going on.
Well, since then, Gemini, BlackRock, and Citadel have denied any involvement. Now, maybe there’s still some kind of market meddling going on, but I can’t find any cold, hard proof. So I’m just reporting what I’ve found.
Okay, so this whole recovery process has been a nightmare, a total failure. Nothing has gone right. Both tokens collapsed, and plans failed. And Do Kwon, who before seemed to spend half his day on Twitter calling people poor, has sure been pretty quiet ever since his project made a literal million people poor. At this point, without outside intervention, it’s nearly impossible for UST to recover.
There’s simply no faith in the system, and people will continue to trade it instead of letting it actually ride up to $1. But the ecosystem does have a few things going for itself. They have just over a billion and a half dollars in reserves and most of which is a massive supply of Bitcoin that they have loaned out. And the blockchain still functions just fine. Technology-wise, it’s a robust system for basic transactions, not stable coins. That probably goes without saying.
But because of this, there are some recovery plans being put together. The first is from Do Kwon himself. So just make sure you stick around for the second one. But Do Kwon wants to do something radical. He said that Luna and UST are basically dead at this point, but the tech is built, the developers are still there, and at this point, everyone knows the name Terra. For better or for worse.
So he believes that the network should launch a new token that would be community-owned, specifically owned by the people who were catapulted into bankruptcy. This new token would have a supply of one billion and be split between Luna and UST holders. 40% of the supply would go to Luna holders from before the de-pegging event, 10% to Luna holders at the time of the final chain halt when the system essentially died, 10% to the community pool, and 40% to UST holders, specifically UST holders at the time of this new token launch.
Now, I don’t particularly like the last line. I feel like it should be to UST holders at the time of the de-pegging, which can be done through a snapshot of the blockchain. Now even though this solution is better than nothing, I think Terra can do a whole lot more. I think this proposal is a bit of a cop-out.
Think about it, the Luna Foundation Guard has $1.5 billion in Bitcoin. This proposal has nothing to do with money. This proposal is basically saying hey, let’s give them a new token. It’ll cost us next to nothing to do and people will feel like they get something. I say let’s put pressure on Terra and the Luna Foundation Guard to give the funds to the people who are actually impacted. There’s a community proposal that’s gaining steam right now and I believe that we should fight for it. And the reason is this proposal would refund 99.6% of UST users and holders.
The proposal starts by acknowledging that Terra and UST are essentially done at their current state. And then it goes on to say that smaller investors are the most impacted. A person with an average income losing $20,000 disproportionately hurts their quality of life versus an ultrarich person losing a million dollars. Plus, smaller investors are the bulk of people actually using a blockchain, not a few hundred whales.
Now if that $1.5 billion was paid out to all UST investors proportionally, everyone would receive like 10% to 20% in reimbursements. Not enough to really be satisfied. But if we focus on the smallest wallets first, nearly everyone can get paid, seriously. This will boost sentiment for the ecosystem and create a ton of goodwill, helping to increase trust.
So how does this work?
Well, a snapshot is taken of the Terra blockchain before the de-pegging event. The Luna Foundation Guard then sells their Bitcoin for around $1.5 billion in USDC. Then anyone who held UST before the Depegging event will be able to redeem their UST for full value USDC. But how is there enough money you might be asking? Well, it turns out that the top 1000 anchor wallets own 82% of all UST. This means with $1.46 billion, Terra could refund 99.6% of all Anchor wallets.
Basically, anyone with less than a million dollars in their wallet would get paid out in full. But what do we then do about the Luna holders and the whales in Anchor? They’re important too. I say that we take Do Kwon’s idea of the new token and give it to them proportional to their previous value and holdings. So we have 99.6% of the community of UST holders paid back and giving the project a bit more trust to potentially use the new token that comes out and is backed by UST whales and Luna holders.
The problem with the $1.5 billion in Bitcoin is we don’t know exactly where it is and we can’t let that money just disappear. We’re the ones who helped build that billion, the users. So this is what I propose. Let’s organize and blow up Do Kwon, Terra and LFG with messages to enact this plan, help build steam and help the greatest number of people possible. This is not only a way out for Terra to build the system back, but it’s also the best way to show the world that crypto can make up for its missteps.
This huge mistake happened, but a large proportion of almost everyone can be paid back in full so tweet, DM, and email everyone involved. Our chances here might be slim but if there’s even a 1% chance of helping out the people hurt by this, I think it’s absolutely worth the shot. And we have the numbers backing us.