The Luna Foundation Guard, a Singapore-based non-profit that maintains the Terra network, has been reaching out to investors in the hopes of obtaining funding to save its struggling stablecoin.
According to The Block, the LFG is aiming to raise more than $1 billion to collateralize the UST stablecoin. The development is unsurprising given that the stablecoin has crashed from the US dollar peg, falling below $0.70 twice this week.
Do Kwon, the founder, and CEO of Terraform Labs, has remained silent about the debacle, and the funding has yet to be confirmed. To say the least, his most recent Twitter message at the time of writing was cryptic:
This comes after a tweet from a few hours ago that stated, “Close to unveiling a $UST recovery plan.” “Hold on tight.”
On May 10, the Luna team issued some clarifications in response to the flood of misinformation that has swept the mainstream media. There will be no “death spiral” if the UST market capitalization exceeds that of LUNA, the token that serves as collateral.
It also noted that user on-chain activities and Terra economy demand, such as network economic activity and accompanying cash flow, support UST. “Peg recovering takes time due to the restrictions,” it continued, “but it bounces back.”
According to a Google analytics dashboard, the stablecoin was backed up with virtually all of the USD reserve value. It has dropped from about $4 billion to around $146 million where it is now.
On May 10, the stablecoin returned to more than 90% of a dollar, but on May 11, it took another downward dip. According to CoinGecko, UST recently plummeted for the second time, hitting $0.696. It has recently rebounded slightly and is currently trading at $0.805.
As a result of the shift, there are several arbitrage opportunities between LUNA and UST, as well as UST and other stablecoins.
According to CoinGecko, the price of LUNA has dropped about 60% in one day, to $11.21. It has dropped 86 percent in the last week and is now 90 percent below its April high.