A member of the Terra Classic community with the X-handle Rexyz has pushed back against burning USTC tokens to allow the stablecoin to restore its dollar peg.
According to the X-message of September 18Rexyz outlines an alternative solution that could result in USTC being revalued at $1 and the price of Terra Classic (LUNC) reaching $1.
Since the collapse of the Terra ecosystem in 2022, the USTC stablecoin has lost its dollar peg and is now trading at 98.8% below the $1 mark.
Following this catastrophic event, members of the Terra Class community have continued to submit several proposals to burn more USTC content as a deflationary mechanism that could lead to the stablecoin restoring its dollar peg.
The Terra Classic community is currently voting on proposal which aims to direct the Binance exchange to burn 50% of the USTC every month. It is believed that if the world’s largest exchange were to help reduce USTC’s circulating supply, it could significantly boost the token’s rise to $1.
A reverse split is more efficient than burying tokens, says a community member
According to Rexyx, burning USTC tokens may not be the best way to regain 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 have to burn massive amounts of USTC to register a significant increase in value.
➡️ LUNC to reach $1? 🤔 ⬅️
It’s a long post, but this ‘can’ save the day #TerraClassic, $LUNC And $USTC at speed. ⬇️
Why I think about burning $USTC may not be the best use of your money.
Currently there is almost 9.8 billion $USTC beaten, to make a real difference in the price you need…
— Rexyz (@RexYellerBelly) September 18, 2023
Alternatively, Rexyz proposes that the Terra community implement a reverse split of the USTC token, leading to a revaluation of the stablecoin, albeit at some investment cost.
In this proposal, Rexyz provides an example, stating that if 100 USTC is the current equivalent of $1, a 100/1 reverse split would convert 100 USTC into just one USTC token, which is now valued at $1. Through this mechanism, USTC holders retain the current value of their holdings and avoid the need to burn more tokens.
However, Rexyz notes that a reverse split would wipe out all existing network debt. This means that USTC investors will have to forfeit all losses incurred during the collapse of the Terra ecosystem.
Can a USTC Reverse Split Save the Terra Classic 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 enhanced 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 increase in the value of LUNC, and the altcoin could even reach new all-time highs. Rexyz advises the Terra community to implement the reverse split of USTC and “pin” their hopes of recouping past losses by investing in LUNC, which also lost 99.9% of its market value in 2022.
However, the members of the Terra Classic community argue that this initiative should be implemented after research and approval by the relevant experts.
USTC trading at $0.012 on the hourly chart | Source: USTCUSDT chart on Tradingview.com
Featured image from Analytics Insight, chart from Tradingview