The UST stablecoin’s price started to decline below its $1 peg on May 9, 2022. As a result, there was a panic sell-off, which further decreased the value of LUNC, Terra’s native token. UST had completely lost its peg by May 13 and LUNC had lost 99% of its value.
It’s questionable whether the Terra Luna Classic (LUNC) team will repeg $UST and return it to $1. A proposal to accomplish this has been approved by the community, however it is not yet known whether the team will put it into action. The expense of repeg, the likelihood of failure, and the potential rewards are some of the elements that could affect the team’s choice.
- Repeg would cost a lot of money. To back the peg, the team would require a sizable quantity of UST. They would need to generate a sizable amount of money for this, which would be challenging.
- Failure is also very likely. If the cost of UST goes below $1 again, the peg might be easily broken. As a result, there would probably be a sell-off of LUNC, which might further reduce the token’s value.
- Repeg’s purported advantages may not even exist. Repeg could help LUNC regain investor trust and raise the value of the stock. Repeg could, despite this, have only a little effect on the cost of LUNC.
The LUNC team will ultimately decide whether or not to repeg $UST. Before selecting a choice, they must consider the risks, expenses, and potential advantages.
The level of community support for the idea is another consideration that the LUNC team may take into account when reaching a decision. Repeg’s technical viability, Regulations and their effects on the LUNC ecosystem are to be considered as well.
Before making a choice, the LUNC team will probably take some time to think about all of these factors. The action is actually a smart one that will help the ecosystem recover. The LUNC team may opt to repeg $UST for a number of reasons, such as to re-gain users’ and investors’ trust in LUNC and the Terra ecosystem, to draw in new users and investors, and to compete with other stablecoins like USDT and USDC.
Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any service.
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