Last week was a horrible week for Terra and his investors. The UST stablecoin lost its peg to the dollar and the LUNA token fell from $80 to $0.000005.
Now there is fierce debate about how the project can be restored. One of the proposals that was made is to burn a large number of LUNA tokens. This could possibly be the only saving grace of the project. After the LUNA crash, the number of circulating tokens shot up to more than 6.5 trillion tokens.
It is therefore not surprising that a large number of investors want the project to ‘burn’ (destroy) a large number of tokens in order to reduce supply and increase value. However, it remains to be seen whether Terraform Labs agrees with this reasoning.
Is Terra going to destroy his own LUNA stock?
Terra itself has also announced a recovery plan, but it is more focused on a Luna fork. However, the CEO of Binance and a large number of investors think that this will not solve much. The only solution, say the investors and Zhao, is to destroy a large number of LUNA tokens.
Destroying the Luna tokens would increase the scarcity of investors’ tokens. As a result, the Terra price will probably rise again towards $1. However, with supply increasing by 1700% in a few days, a massive token burn would be needed to restore this price.
It’s also good to know as an investor that, despite many Twitterers claiming that Terra will announce a major token burn, there have been no official announcements about such a token burn yet.