CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US English

Terra Classic USD re-peg: Zaradar proposal in full as USTC price-pumps

By Raphael Sanis

16:03, 10 October 2022

TerraClassicUSD
USTC fell from its $1 peg in May 2022 and has failed to return to the target price since – Photo: Shutterstock

The much-anticipated terraclassicusd (USTC) re-peg proposal by the developer Tobias Andersen has been released.

It outlines multiple different routes for the failed stablecoin to regain its $1 peg, which USTC has struggled to come anywhere close to since the May crash.

While some community members abandoned the project for the newly launched LUNA2 others have remained and attempted to fix the original network.

LUNA2 to USD

After the plan was released, USTC has been surging. At the time of writing, it was trading at $0.41, up 37% in the past 24 hours and 28% over the previous week.

Easing vs tightening

Andersen, also known as Zaradar, outlined in his Medium post two different paths that the Terra Classic community could take. The first was quantitative easing, a method usually used by central banks, where they purchase government bonds to kickstart economic activity.

The developer did not fully outline how this would apply to Terra Classic. But he said it “would at best result in a slight bump in inflation and could worst case lead to a mass exodus of the remaining liquidity as ‘smart money’.”

The other path, Andersen/Zaradar said, was is a more “painful journey” that adapts quantitative tightening, a technique used by central banks to decrease liquidity in the economy.

BCH/USD

377.90 Price
-0.500% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 2.50

BTC/USD

63,851.65 Price
-1.480% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00

XRP/USD

0.58 Price
-9.770% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.01168

ETH/USD

3,414.15 Price
-0.540% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 6.00

If this route were taken, Terra Classic would install burn taxes and increase interest rates on staking rewards. This would be completed by lowereing rewards, and increasing lock-up peroids.

Andersen said: “Combined with a razor-sharp focus on attracting fresh capital… it is my belief that we can create a more attractive environment for new businesses to setup shop.

Attracting capital and repegging USTC

The Zaradar proposal has also outlined a plan to attract investments, which could result in the repegging of USTC.

Incentivising new businesses was seen as essential for growing the network and improving stability of the cryptocurrency.

He said  “To accomplish this feat, we will need to implement a host of new features that can enable us to establish additional ‘capital controls’ which will allow entrepreneurs to create new features.”

These features would include partitioned pools, where new commodity tokens are created and based on each pool. This also brings another utility to USTC as a “value transfer”, with investors using the stablecoin to swap between pools.

Partial swaps are another newly proposed feature, which enable transactions between the USTC stablecoin and the terra classic (LUNC) cryptocurrency.

Andersen said: “Paired with increased on-chain utility and consistent network growth, this would allow value to start flowing thru the capital pools in a way that would yield tax revenue which could slowly help recapitalize the platform reserves.”

Next steps

The Zaradar proposal came a week after another plan to repeg USTC was proposed by three members of the Terra Classic community, Alex Forshaw, Edward Kim and Maximilian Bryan.

As both plans are new, there are no specific timings outlined. It is now being left to the community to debate these proposals.

Markets in this article

LUNA2/USD
LUNA2.0 to USD
0.4437 USD
-0.0179 -4.030%

Related topics

Rate this article

Related reading

The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided in this article is for information purposes only and should not be understood as investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents and has not been prepared in accordance with the legal requirements designed to promote investment research independence. While the information in this communication, or on which this communication is based, has been obtained from sources that Capital.com believes to be reliable and accurate, it has not undergone independent verification. No representation or warranty, whether expressed or implied, is made as to the accuracy or completeness of any information obtained from third parties. If you rely on the information on this page, then you do so entirely at your own risk.

Still looking for a broker you can trust?

Join the 630,000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading