After losing most of their value in the past two weeks, Terra’s native tokens – UST and LUNA – are experiencing major price swings.
The volatility comes just after Terra has voted for the community on its recovery proposal, which proposes to hard fork the blockchain into a new version.
The new version will discard the UST stablecoin and also create a new LUNA token. The old chain will be called Terra Classic.
Early voting shows that nearly 78% of Terra owners favor the hard fork. This contrasts with the results of a preliminary vote, as well as online rhetoric opposing the move. About 20% of Terra holders voted against and vetoed the hard fork proposal. Voting closes on May 25.
UST, LUNA volatility spikes
UST was the more volatile of the two. Prices rose as much as 200% in minutes after the vote on the proposal began, before falling below $0.1 shortly afterwards. The token had then hovered around the price level before hitting $0.09 when printed – a 28% drop in the past 24 hours.
LUNA prices also rose a whopping 10% in the first few minutes of voting. Since then, the token has drastically crashed to a low of 0.00001464 and has fallen by about 20% in the past 24 hours.
Both LUNA and UST have lost more than 99% of their value since early May, data from Coinmarketcap shows. The Terra crash is considered one of the most drastic value losses in recent history.
Mixed sentiment on the hard fork plays a major factor in the prices of the two tokens. But it’s unclear how prices will pan out if a Terra version 2 actually launches.
Hard fork or redistribution of value?
Prior to the opening of the vote, Terra developers were stuck between two main paths forward – to fork, or to use existing reserves to pay back investors.
Several key voices in the crypto community, including Ethereum founder Vitalik Buterin, and Binance CEO Changpeng Zhao had called on Terra to redistribute its remaining reserves to help support developers and investors.
Under the forking plan, a new version of LUNA will be broadcast to holders on the old chain. But given the lack of goodwill towards Terra after the crash, market participants expect the new token to follow the same path as its predecessor.
With over five years of experience in global financial markets, Ambar plans to leverage this knowledge for the fast-growing world of crypto and DeFi. His main interest lies in finding out how geopolitical developments could affect crypto markets and what that could mean for your bitcoin holdings. When he’s not scouring the internet for the latest news, you can play him video games or watch Seinfeld reruns. You can reach him at [email protected]
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This post LUNA, UST Volatility Rises as Voting on Terra Fork Begins
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