A Terra Classic community member and TerraCVita member, Rex, has outlined some proposals and reverse split re-pegging that could see LUNC return to $1.
Since the Terra Collapse of last May, the community has made several attempts to re-peg USTC and push the price of LUNC above $1. However, these proposals have not proven productive. To this end, Rex has outlined recommendations to help LUNC regain $1.
Rex explained that encouraging network growth will contribute to the LUNC price increase. He explains that the network has been attracting developers in recent times.
➡️ LUNC to reach $1? 🤔 ⬅️
Why I think burning $USTC is maybe not the best use of your money.
Currently there is nearly 9.8bn $USTC minted, to make a real difference to the price you need to…
— Rexyz (@RexYellerBelly) September 18, 2023
According to Rex, if the new code for the Terra Classic network is freely available, like when Terra initially started, more dApp builders will turn to the network.
The network could also attract builders by allowing them to whitelist their dApp wallets so as not to pay the prevailing burn tax. However, Rex noted that the community needs to support builders to take the initiative.
Token Burning is Not the Way To Go
As part of previous proposals, the Terra community has been burning USTC and LUNC tokens. While proponents have championed the burn campaign, Rex says it may not be the best action.
There are currently 9.78 billion USTC coins in circulation. According to Rex, billions must be burnt before the price of USTC can reach $1. The same logic applies to LUNC. However, this seems less likely to happen.
Reverse Split Isn’t of Direct Re-peg
There is currently a proposal to re-peg USTC. The proposal seeks to increase the price of USTC from $0.01248553 to $1. If this happens, the market cap of USTC will increase to $9.78 billion.
Instead of a direct re-peg, Rex has recommended that the community adopt a reverse split mechanism. This mechanism will re-value the USTC stablecoin without increasing its market valuation.
What this means is that if you hold USTC worth $100 (8,012.82 at the current price), during the re-pegging, you will receive $100 worth of USTC (at 1 USTC to $1).
This reverse split model will keep the market cap of USTC at $97.8 million instead of an increase to $9.78 billion. Holders of USTC will also lose out on the 80x growth that would have taken USTC’s price to $1 from $0.01248551.
Will LUNC Ever Reach $1?
After USTC has been re-pegged, Rex believes burning USTC could help push LUNC’s price up. This will lead to an increase in the value of the Terra Classic oracle pool, leading to more staking rewards.
The increased staking rewards will also help attract more network investors. While LUNC staking becomes more profitable, the network’s bathtub curve model (which declines over time) will prevent the oracle from being drained by large investors.
While there are some drawbacks to the reverse split re-pegging, LUNC will stand a greater chance of recovering $1. At the time of this writing, LUNC trades at $0.00005761 per coin. The re-pegging of USTC will also attract more developers to the Terra Classic network.