The huge crash of terra (LUNA) as well as the terrausd (UST) stablecoin will probably not have escaped your attention. It causes a lot of loss among investors of the formerly large altcoin, but also attracts the rest of the cryptocurrency market.

The crash of LUNA & UST

UST is a so-called ‘algorithmic’ stablecoin and is supported by a handful of different currencies such as LUNA and bitcoin (BTC) to be pegged 1:1 to the US dollar. Every time a new UST token is created, a LUNA token is destroyed, and vice versa.

However, with UST losing its 1:1 peg to USD this week, it created a loophole in the system. However, it is not yet entirely clear why this happened. It is speculated that it is due to the overall declining market, but there is also speculation that it may be related to a liquidity attack on Anchor and Curve.

Terra founder comes up with rescue plan for UST

Meanwhile, it was remarkably long and eerily silent from the Terra team. Yet Terraform Labs CEO Do Kwon just finally responded to the situation. Kwon says he has no intention of giving up and is coming up with a rescue plan for UST.

β€œBefore we do anything, the only way forward is to absorb the stablecoin stock that wants to get out before UST can start to link back. There is no way around this.”

According to Kwon, who indicates that he community proposal 1164 supports. The plan is to increase the network’s capacity to create UST tokens by four times, from $293 million to $1.2 billion. This kind quantitative easing However, it can also have consequences and it is far from certain whether this can save both crypto at all. Kwon himself still sounds very confident.

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