With UST out of the peg for days now, Terra had to find a way to absorb today’s vast supply of UST. This puts a lot of pressure on LUNA’s prices.
1/ The prevailing peg pressure on $UST from its current supply overhang is rendering severe dilution of $LUNA.
The primary obstacle is expelling the bad debt from UST circulation at a clip fast enough for the system to restore the health of on-chain spreads.
— Terra (UST) Powered by LUNA
(@terra_money) May 12, 2022
To meet the supply cut target, UST has taken a number of measures, the first of which is Prop 1164, toExtending Mint Luna from $293M to $1,200M per day, may switch from Algorithm to Collateral at a later date. and accelerates the burn rate of UST, which reduces dispersion on the chain.
And most recently, TFL has proposed to burn the remaining UST cross-chain of the Community Pool that currently has approximately 1,017,233,195 UST, which will reduce supply by about 8.05%
It also proposed burning the remaining 371 million UST cross-chain on Ethereum – causing the total burn to be 1,388,233,195 UST or approximately 11% Supply
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