The Terra Classic (LUNC) community has devised an intriguing strategy to manage the circulation of USTC (Terra Classic’s native stablecoin). This new measure from the community to control USTC minting and reminting has had remarkable implications on the value of LUNC over the past few days.
The primary avenue for USTC’s entry into circulation is through Terra Classic’s market module. However, during market crashes, a temporary measure was put in place to prevent swapping between LUNC and other stablecoins using the market module. This was achieved by increasing the spread to 100%, effectively deterring users from engaging in these swaps.
To further disable USTC minting, the Layer One Task Force (LITF) introduced a new governance parameter. This parameter empowers the community to adjust the Tobin tax for swaps to USTC. The goal here is to provide a mechanism for controlling the creation of new USTC tokens.
As $LUNC proposal #11868 passed (to fulfill #11784), $USTC now is no longer mintable. Stable-to-stable swaps are disabled. #LUNC/#USTC swaps via terraswap are still available of course. https://twitter.com/ColeStrathclyde/status/1723293889224732942/photo/1
— StrathCole (@whale_alert) November 12, 2023
Simplifying Stablecoin Control
Recognizing the complexity of existing stablecoins other than USTC, there was a discussion within the community about simplifying the process. The proposal involved increasing Tobin taxes for all stablecoins to 100%, thereby rendering all market swapping and associated coin minting on Terra Classic inoperable. The objective is to prevent new USTC from entering circulation.
The Impact on Terra Classic (LUNC)
Following the approval of this significant proposal, LUNC’s value experienced a substantial 45% surge, catapulting from $0.000064 to a high of $0.00009476. LUNC nearly erased a zero, reaching almost $0.0001, but has fallen since then and is trading at $0.00007891, down 5.25% in 24 hours.
This surge happened between November 9 and 10, and this unprecedented move has sent shockwaves through the crypto community, leaving many wondering what ignited this sudden surge.
The price surge was accompanied by a substantial increase in trading volume, skyrocketing from an average of $30 million to $333 million in just two days. This surge in trading activity can be attributed to a pivotal proposal related to USTC minting, which received overwhelming support from the LUNC community.
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