After losing most of their value in the past two weeks, Terra’s native tokens- UST and LUNA- are experiencing large price swings.
The volatility comes just after Terra opened community voting on its recovery proposal- which proposes to hard fork the blockchain into a new version.
The new version will discard the UST stablecoin, and also create a new LUNA token. The old chain will be called Terra Classic.
Early voting shows that nearly 78% of Terra holders are in favor of the hard fork. This contrasts the results of a preliminary vote, as well as online rhetoric that opposed the move. About 20% of Terra holders have voted against, and vetoed the hard fork proposal. Voting is set to close on May 25.
UST, LUNA volatility spikes
UST was the more volatile of the two. Prices jumped as much as 200% in minutes after voting on the proposal began, before crashing down to below $0.1 shortly after. The token had then swung around the price level before settling at $0.09 at press time- down 28% in the past 24 hours.
LUNA prices also jumped as much as 10% in the initial few minutes of voting. Since then, the token has crashed drastically to as low as 0.00001464, and is trading down about 20% in the past 24 hours.
Both LUNA and UST have lost over 99% of their value since the beginning of May, data from Coinmarketcap shows. The Terra crash is considered to be one of the most drastic losses of value in recent history.
Mixed sentiment over the hard fork is playing a major factor in the prices of the two tokens. But it is unclear how prices will play out if a Terra version 2 is actually launched.
Hard fork or value redistribution?
Prior to the opening of the vote, Terra developers were stuck between two main paths forward- to fork, or to use existing reserves to repay investors.
Several major voices in the crypto community, including Ethereum founder Vitalik Buterin, and Binance CEO Changpeng Zhao had called on Terra to redistribute its remaining reserves to help support developers and investors.
Under the forking plan, a new version of LUNA will be airdropped to holders on the old chain. But given the lack of goodwill towards Terra after the crash, market participants expect the new token to follow the same path as its predecessor.
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