Terraform Labs CEO Do Kwon has unveiled a plan to restore the price of algorithmic stablecoin UST.
The plan is to speed up the release of LUNA. According to the mechanism, 1 UST should be available for exchange at any time for $1 in LUNA. According to Kwon, this “allows the system to absorb UST faster.”
After the publication of the plan, LUNA price fell below $1. For a short time, the price was in the region of $0.8.
The UST parity model with the dollar relies heavily on arbitrageurs. If the price of a stablecoin falls below $1, traders can buy it and exchange it for $1 in LUNA, making a profit.
For the mechanism to work, demand for the target asset is required.
