After the UST "stablecoin" hit new lows reaching $0.22, the BTCUST pair reached $138,000 UST rising +300%.
The Terra (Luna) cryptocurrency has already lost 94% of its value according to CoinMarketCap data, while TerraUSD (UST) struggles to regain its parity with the US dollar.
During the trading of the European market, the stablecoin TerraUSD (UST) fell by 72% causing a strong valuation of Bitcoin (BTC) against TerraUSD (UST).
On May 10 at 2h 20m (UTC) Binance suspended the withdrawals of LUNA and UST on the Terra network, informing in its statement that the decision was due to the increase in the volume of pending withdrawal transactions. This caused users to express their dissatisfaction and emphasized the phrase "they are not your keys, they are not your coins".
Do Kwon said for the community,
Dear Terra Community:
I understand the last 72 hours have been extremely tough on all of you - know that I am resolved to work with every one of you to weather this crisis, and we will build our way out of this. Together.
First, if you don't understand how Terra's peg stabilization mechanism works, here is a good overview: TWEET.
A review of the current situation: UST is currently trading at 50 cents, a significant deviation from its intended peg at $1.
The price stabilization mechanism is absorbing UST supply (over 10% of total supply), but the cost of absorbing so much stablecoins at the same time has stretched out the on-chain swap spread to 40%, and Luna price has diminished dramatically absorbing the arbs.
Before anything else, the only path forward will be to absorb the stablecoin supply that wants to exit before $UST can start to repeg. There is no way around it.
We propose several remedial measures to aid the peg mechanism to absorb supply: First, we endorse the community proposal 1164 to Increase base pool from 50M to 100M SDR *) Decrease PoolRecoveryBlock from 36 to 18 This will increase minting capacity from $293M to ~$1200M.
This should allow the system to absorb the UST more quickly.
Disclaimer: The information provided in this section does not represent investment advice. Sources: Binance, Twitter, CoinMarketCap.