By Geoffrey Smith
Investing.com — and fell further on Wednesday, despite pledges of support from Do Kwon, the cryptocurrency guru who co-founded the stablecoin.
As of 4:05 p.m., TerraUSD was trading at 33 cents, well below its theoretical $1 peg, after a Twitter post from Do Kwon acknowledged that he and other network backers needed time to restore anchorage.
Kwon indicated that he approves of what amounts to an effective recapitalization of the network that underpins Terra, increasing the minting capacity of Luna tokens from 293 million to around 1.2 billion. According to the algorithm that governs the network, Luna tokens must be created for each redeemed UST.
“Above all else, the only way forward will be to absorb the supply of stablecoins that want to exit before $UST can begin to reposition. There is no way around this problem” , Kwon said.
Kwon acknowledged there would be a “heavy cost” to UST and LUNA holders in the interim. Luna tokens have been in freefall since Saturday, when the UST peg mechanism to the dollar began to unravel. They fell 88% to 3.7c at 4:05 p.m.
Kwon also hinted that more capital will be needed in the future, saying that “we will continue to explore various options to bring more exogenous capital into the ecosystem and reduce the oversupply on UST.”
UST was trading at around 47 cents before Kwon’s thread was released. She briefly climbed to 49c before turning around.
Developments over the past three days have dealt a severe blow to Kwon’s aspirations to create a widely accepted stablecoin based on algorithmic programming, rather than actual reserves of fiat currency. Until last weekend, the Terra project had emerged as one of the most spectacular successes in the cryptocurrency world, with UST’s market capitalization reaching over $40 billion, thanks to the ease with which it can be accessed from other crypto-blockchains, including . At that time, the only two stablecoins with a larger market value were and , both backed – as far as anyone could tell – by dollar reserves.