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Terra’s LUNA token shed nearly a quarter of its value in the past 24 hours after a proposed revival plan revealed by founder Do Kwon, data shows.
LUNA rose to as much as $0.00022 on Monday evening as plans to fork the current Terra blockchain went viral on social media. LUNA then shed as much as 22% in early Asian hours to trade at just over $0.00017 at writing time. Some $2.1 billion worth of the tokens were traded in the past 24 hours alone.
The token is down more than 99% since April highs of nearly $120. The drop came as excess LUNA was put into circulation last week to prevent the collapse of terraUSD (UST), a Terra ecosystem stablecoin pegged to U.S. dollars, as reported.
Last night, Kwon proposed forking Terra to a new chain that would entirely cut out its failed UST product and instead focus on decentralized finance (DeFi) applications building on Terra.
The current chain would continue as Terra “Classic,” while holders of LUNA on the “Classic” chain would receive token airdrop on the new chain’s token under the plan. Although still a proposal, if a majority of network validators and the community were to approve the plan, the new network could be launched as soon as May 27, Kwon said.
Sentiment remains mixed for the proposal among the crypto community.
Some said they would support the new chain and anticipated the airdrop to prior holders. Others suggested the plan was unfair because it could vastly benefit investors who purchased massive amounts of LUNA at a few pennies more than those who purchased the tokens when they were valued above $100. To combat this, however, Kwon proposed holding two snapshots – one prior to UST’s collapse, and one after – and airdropping equivalent amounts of new tokens.
Plans to compensate relatively "small" holders of UST and LUNA affected in last week’s collapse were also underway, Kwon claimed.
Despite LUNA's and UST's crash last week, some market observers remain upbeat on the longer-term outlook of algorithmic stablecoins, which are typically backed by other cryptocurrencies and rely on traders who buy and sell the underlying tokens to continually maintain their peg.
"It is still the earliest days of algorithmic stablecoins," Brian Gallagher, co-founder of Partisia Blockchain, said in a Telegram message this weekend. "There will be many failures along the way to hold the peg, as they're mostly in the experimental phase. We have to accept the failures along the path.”
However, critics likened protocols designed like UST to those of a Ponzi scheme. "It sounds just like a crypto version of a pyramid scheme," billionaire and Pershing Square Capital founder Bill Ackman said in a tweet on Tuesday. "Investors were promised 20% returns backed by a token whose value is driven only by demand from new investors in the token. There is no fundamental underlying business."
"Schemes like [l]una threaten the entire crypto ecosystem. The crypto industry should self-regulate away other crypto projects with no underlying business models before crippling regulation shuts down the good and the bad," he added in a follow-up tweet.