Terra Validator Opposes USTC Burning, Pushes Alternative Plan To Regain Dollar Peg

A Terra Classic community member with the X handle Rexyz has kicked against burning USTC tokens to enable the stablecoin to recover its dollar peg.

According to the X post made on September 18, Rexyz outlines an alternative solution that may lead to USTC being re-valued $1 as well as push Terra Classic (LUNC) price to reach the $1 price mark.

Since the collapse of the Terra ecosystem in 2022, the USTC stablecoin has lost its dollar peg and now trades at 98.8% below the $1 mark. 

Following this catastrophic event, members of the Terra Class community have continued to submit various proposals to burn more USTC contains as a deflationary mechanism that could result in the stablecoin recovering its dollar peg. 

Currently, the Terra Classic community is voting on a proposal that aims to direct the Binance exchange to start burning 50% of USTC every month. It is believed that if the world’s biggest exchange aids in reducing the circulating supply of USTC, it could significantly boost the token’s rise to $1.

According to Rexyx, burning USTC tokens may not be the best way of regaining the stablecoin’s dollar peg. The Terra Classic community member explains that there are currently 9.8 billion USTC tokens in circulation, and users will need to burn massive amounts of USTC to record any significant rise in value.

LUNC to reach $1?

Its a long post, but this 'could' rescue #TerraClassic, $LUNC and $USTC at speed.

Why I think burning $USTC is maybe not the best use of your money.

Currently there is nearly 9.8bn $USTC minted, to make a real difference to the price you need to…

— Rexyz (@RexYellerBelly) September 18, 2023

Alternatively, Rexyz proposes that the Terra community implements a reverse split of the USTC token, which leads to a revaluation of the stablecoin, albeit at some investment cost.

In this proposal, Rexyz gives an example, stating that if 100 USTC is the current equivalent of $1, a 100/1 reverse split would convert 100 USTC to just one USTC token, which will now be valued at $1. Through this mechanism, USTC holders retain their holdings’ current value, and there is no need to burn more tokens. 

However, Rexyz notes that a reverse split would erase all existing network debt. This means that USTC investors will have to forfeit whatever losses incurred during the collapse of the Terra ecosystem. 

Interestingly, Rexyz also stated that the revaluation of the USTC token could initiate a recovery of the Terra Classic network. The community member explained that once USTC regains its dollar peg and the LUNC-USTC swap mechanism is tested with the implementation of improved capital controls, investors can start burning trillions of LUNC.

Related Reading: USTC Surprises With Nearly 60% Rally – What’s Going On?

Rexyx believes this will lead to a massive rise in LUNC’s value, and the altcoin may even record new all-time highs. Rexyz advises the Terra community to implement the reverse split of USTC and “pin” their hopes of recovering past losses by investing in LUNC, which also lost 99.9% of its market value in 2022.

However, the Terra classic community member states this initiative should executed upon research and approval by the relevant experts.