Terra is dead, and so too is the TerraUSD.
Just weeks ago, the Terra blockchain was worth over $40 billion. Its namesake stablecoin, the TerraUSD, had more than $19 billion worth of USD in circulation.
And this week, it all came crashing down.
Terra fell more than -97% in the last 24 hours, trading well below a penny at $0.0001905.
TerraUSD, the Terra chain’s stablecoin pegged to the value of a dollar, was trading at $0.1517. It was down more than -60.5%.
Today, the value of both Terra and its TerraUSD stablecoin were worth a combined $3 billion. That’s a far cry from the cumulative $59 billion that they were worth before this whole mess unfolded. Terra was sitting #212 on the CoinMarketCap leaderboard, while $UST fell to #39.
For the TradFi acquainted, I assume this looked (and felt) a lot like like when Bear Stearns or Lehman Brothers collapsed. On the bright side though, many people anticipated that Terra could collapse (and in this case, at least the housing market and global economy isn’t going to go with it.)
If not for the support of aspirational dip-buyers, who helped buoyed both coins during market volatility, it probably would’ve collapsed much earlier in the week. But as they say, old habits die hard. The bulls ultimately ceded victory yesterday evening to the bears, short-bettors, and unstable state of the network network.
In conclusion: It’s a fantastic (and expensive) conclusion for two coins which used to sit among the top 10 cryptos by market cap.
Or is it?
One question atop every trader’s mind is “what if?” What if Terra actually does come back? What if actually decides to give its stablecoin some new blood, namely by “backing it” with assets of real value? (Terra began to make strides to back $UST with Bitcoin … which reminds us: what ever happened to the Bitcoin during this whole thing?)
Terra’s Master of Stablecoin (and arguably the chain’s most foremost figure), Do Kwon, has indicated his desire to find a path forward for the crypto. In a tweet made this evening, he indicated that UST would not be the money for a decentralized economy. However, he indicated his desire to find the best step forward for Terra.
As part of that tweet chain, he published a revival plan for Terra’s ecosystem. That implies that $UST will probably not be apart of the path forward, at least for awhile, but Terra’s ecosystem was more than its stablecoins and the controversial Anchor Protocol which popularized $UST and Terra in the world of DeFi.
There were dozens of protocols and dapps. Among them were Terraswap, a DEX; Aperture Finance, a “cross-chain investment ecosystem” for DeFi stans; and the controversial Mirror Protocol, which allowed traders to purchase synthetic versions of U.S. stocks.
As part of that plan, Do Kwon proposes that the community “reconstitute the chain” by resetting the chain’s token supply to 1 billion. The 1 billion $LUNA would then be distributed to Luna holders before the depeg (40%), UST holders (40%), Luna holders who held until the end (10%), and a community pool (10%.)
Do Kwon’s proposal excludes directly reimbursing people who lost money on $UST. It also excludes people who sold before $UST went to its new not-so-stable price point of $0.20. This is unlikely to stoke confidence among holders, especially small and scrappy retail investors that maybe struggled to understand the risk that they were taking on.
That’s why another proposal put forward by user FatMan desires to “put the small trader first.” He cited that $LUNA could not be salvaged, that the impact of the collapse hurt small traders disproportionately, and that not acting in the best interests of smaller investors would likely make it impossible to rebuild trust with investors. FatMan’s proposal would offer tiered repayment of USDC or USDT to smaller investors.
At this stage in the game, these proposals are just that: proposals. However, we’ll keep tabs on the developments as they emerge.