Is Terra ever going to recover from this? I’m seeing a lot of people on Twitter posting that Luna is going to a dollar, Luna is going to 10 cents or even just to one cent which might sound like extremely feasible and easy to achieve. But, in fact, there’s much more to this than the unlimited supply that Luna currently has with more than 6.8 trillion coins in the market right now. There’s a lot of chaos and on top of that Do Kwon the inventor of Terra came out and proposed a revival plan for Terra which is what i’m going to present to you.

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What happened with this Terra thing the quick TLDR is that an economic misalignment and economic miscalculation in the UST Luna model which is packed to each other where Luna is burned to mint UST which is an algorithmic stable coin that is supposed to retain its value at one dollar. This pack broke USD went to five ten cents Luna itself went from a hundred dollars all the way down to a fraction, literally a fraction of a cent fell to a market cap of six million dollars. Ig is when the developers and the validators actually decided to halt the chain to stop minting and burning of UST and now just a few hours later the chain resumed the chain is up again. The price of Luna shot through the roof and more than 500 axes or something crazy like that now obviously since we are still in crypto land and people are not learning from their mistakes. People are now trying to make money with this. They’re trying to gamble, they’re trying to put in money because some people are saying this thing. If it hits a dollar, I’m gonna be a billionaire, I’m gonna be a millionaire, I’m gonna make so much money.

The point is to explain to you that it is extremely unlikely. First things first, this bear trend is not over yet Bitcoin dropped again below 29 000. Ethereum is below 2 000 and if you look across the board all other cryptocurrencies are down massively again 14 on ADA which is now below 50 cents, Solana minus 13. All these coins have lost so much value, except for one seemingly shining star in the crypto skies which is Terra Luna suddenly back in the top 30 almost 32 here on coin market cap with a market value of 2.5 billion US dollars.

 Now if we look at Terra, they seem to be on an absolute Moon run back in the top 30 almost and this is, I don’t even know how to pronounce that number, it’s basically at zero at the price. But, why is it in the top 30 almost because the supply went absolutely through the roof? There are now 6.5 trillion Luna in circulation. This was a trillion a couple of weeks ago, this was just a few hundred million right now. It’s in the trillions, so Luna is hyperinflated because a lot of people burned their UST which were d-packed. They actually flooded the market with luna which were minted in crazy crazy amounts. This is why we have an extreme supply of Luna right now on the market which is why the price is so low. As a response to this response to this hyperinflation of Luna which was predictable that’s also why a lot of people shorted the price of Luna, CZ came out the founder of Binance on who he said he was in a no phone meeting for two hours. At least, there’s progress. The Luna blockchain resumed no more minting which got a lot of people crazy bullish because now the inflation stops. The price should go up and people ape in again right because Binance is resuming trading deficits withdrawals and trading.

Now resumed, don’t just buy a coin because trading is on. Do your own research with extreme caution. So, that’s the final disclaimer, but still a lot of people went ahead and bought massive amounts of Luna thinking that now that the minting is stopping it will go back to a dollar a bit later Do Kwon then came out and said in a thread that he has been on the phone non-stop talking to community members builders employees friends family that have been devastated by the USTD packing and that he’s basically extremely sorry for it but at the same time he has been extremely bragging and borderline arrogant not borderline he was extremely arrogant over the past few months on twitter bragging about how great his invention is. That everybody who is doubting the concept and the system is spreading fat and is poor and what not and now he has to go through this really bad time. I’m sure his personal safety is also in question right now. I’m sure a lot of people are suing him. I’m sure he’s getting a lot of death threats. I would not want to change with Quan right now. But, he also added he still believes that decentralized economies deserve decentralized money yet. It’s clear that UST will not be that money. So, in fact, in a nutshell, UST is dead right the whole concept, the whole product, the whole value proposition of Terra which was the UST stable coin which had demand predominantly through Anchor that can be argued whether or not this was a Ponzi scheme because it had subsidized yields not real yields. 

The question is always where do the yields come from if they were subsidized. I don’t think it was purely designed to be a scam from the beginning but the system collapsed. Now the whole value proposition is gone which means Terra in its form is completely dead. It’s just over right, so there’s no hope left for anybody who believes that Luna will recover from this and they’re just gonna magically repack UST and get Luna back to a hundred dollars. This is not going to happen, the damage is crazy, it’s way too big to roll this back. He’s also saying that he didn’t sell any Luna, he didn’t sell any UST. And then he also shared a proposal to revive the Terra ecosystem which he thinks should be done, in order to, at least compensate for some of the losses and to at least revive Terra with a completely different pivot. We’ll get into this in a second, but, basically, he’s saying that there’s still several billion dollars worth of UST where the Luna token literally has essentially fallen to zero, but these billions are billions of UST. They still have to have to be burned, they still have to be redeemed or sold right. So, that’s still a big danger and big cell pressure on a bunch of liquidity pools also in osmosis which is why this emergency proposal went through quickly and had to go through. So, quick to protect the Osmo and all the other pairs in that pool. 

They’re still a wave of sellers that need to get out of UST, but it’s over that’s the whole thing. However, what he’s saying is well. What we still have is we have a big developer ecosystem. We have Terra stations which still have million-plus users and we still have somehow brand recognition. Even though, the trust obviously is completely destroyed. So, he’s suggesting that for the terror community which I think now he’s kind of like giving away this accountability and responsibilities just advising. What could be done but not by him is that validators should reset the network ownership to 1 billion tokens and distribute these tokens to Luna holders before they depending event 40 exclude the Terraform labs account though 40 to UST holders at the time of the new network upgrade and then 10 to Luna holders at the final moment of the chain halt and then 10 percent in the community fund community pool, to fund future development now. 

This obviously gets people bullish and a lot of people have also said like sure, they can still revive the layer one ecosystem and compete with the likes of Solana or Avalanche and just be a smart contract platform. But, I don’t know if that’s going to work out. I think what most people see right now is the trust is entirely broken used. He’s dead Luna is dead, but we somehow want to get some of our money back at least right i don’t think anybody is keen to use Terra or be affiliated with Do Kwon or the whole Terra ecosystem at this point. I still think there’s an active community and there might be some hardcore lunatics out there that will you know fork the network and try everything. They can but I’m also seeing a lot of different directions. People want to take this so I don’t really think that anything is going to come out of this the damage is done. It’s over now.

What’s left I said, Juno network and a lot of other Cosmos chains are going to benefit from this massively because a lot of projects are now spilling over and the easiest and lowest. Tanki Fruit is simply another smart contract platform in Cosmos. Terra was a smart contract platform, a layer one in Cosmos built on the customer SDK implementing Cosmo ASM. But, now these developers have these talents, and what he says also these users the community. They are coming over to other chains9 cosmos and that’s a big value add for the rest of the cosmos ecosystem and also proves the entire architecture because Atom, Juno, and Osmo were not affected in terms of the operations of the chain right. The chain didn’t hold anything that was affected besides liquidity pools on Osmosis, but the rest is fine.

This article is a transcription of a video made by Cryptocito

Original video: https://youtu.be/K4DcTqci2LY