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Traders were selling tokens even as founder Do Kwon suggested a separate network to make up for last week’s UST collapse.
Data shows that LUNA Terra has lost nearly a quarter of its value in the past 24 hours following the proposed revival plan presented by founder Do Kwon.
LUNA rose to $0.00022 Monday night as plans to fork over Terra’s current blockchain went viral on social media. It then lost as much as 22% in the early Asian hours and was trading at just over $0.00017 (as of this writing). In the last 24 hours alone, about $2.1 billion worth of tokens were sold.
The token is down more than 99% from its April high of nearly $120. The drop came as a surplus of LUNA was released into circulation last week to prevent the collapse of terraUSD (UST), a stable coin in the Terra ecosystem pegged to the U.S. dollar.
Last night, Kwon proposed splitting Terra into a new blockchain that would completely eliminate its failed UST product and instead focus on decentralized finance (DeFi) applications built on Terra.
According to Kwon, while it’s still a proposal, if a majority of the network’s validators and community approve the plan, the new network could be up and running as early as May 27.
The sentiment of the cryptocurrency community about the proposal remains mixed.
Some said they would support the new chain and expected a handout to coin owners. Others suggested that the plan was unfair because it could have benefited investors, who bought huge amounts of LUNA for several dozen times less than those who bought tokens when they were above $100. To combat this, however, Kwon suggested taking two snapshots, one before the UST collapse and one after, and giving away an equivalent number of new tokens.
Kwon said plans to compensate relatively “small” UST and LUNA holders affected by last week’s collapse are also underway.
Despite last week’s collapse of LUNA and UST, some market watchers remain optimistic about the long-term prospects for algorithmic stackcoins, which are typically backed by other cryptocurrencies and rely on traders who buy and sell underlying tokens to constantly maintain their pegs.
“These are still the early days of algorithmic Stablecoin,” Brian Gallagher, co-founder of Partisia Blockchain, said in a Telegram post this weekend. “There will be a lot of setbacks along the way to holding a tie-in, as they are mostly in the experimental stage. We have to accept setbacks along the way.”
Critics, however, have compared protocols designed as USTs to Ponzi scheme protocols. “It looks like a cryptocurrency version of a financial pyramid scheme,” Bill Ackman, founder of Billionaire and Pershing Square Capital, wrote Tuesday. “Investors were promised a 20 percent return backed by a token whose value is determined only by demand from new investors for the token. There is no fundamental underlying business.”
“Schemes like Luna threaten the entire crypto ecosystem. The crypto industry needs to self-regulate other crypto projects without basic business models before crippling regulation shuts down both the good and the bad,” he added.
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