Behind the skyrocketing of USTC, is Mint Cash's airdrop expected to make a comeback with LUNA?
However, this post aimed at saving USTC did not cause much of a stir in the market until November 26th, when USTC saw a 180% increase in 24 hours. The community then realized that there were more noteworthy events behind the rise of USTC.
Celestia+ New Anchor+Nomic, what does Mint Cash want to do
Behind the skyrocketing prices of USTC, the most eye-catching thing is a new project - Mint Cash. Mint Cash claims to be the spiritual successor of TerraUSD (UST), and its team members come from the former Anchor team and Aleph Research, including team leader Shin Hyojin and engineer Minjae Yang.
On November 25th, Shin Hyojin, the head of the Mint Cash team, explained the relationship between Mint Cash and Terra on the X platform. She mentioned how to obtain the Mint Cash airdrop by using the airdrop contract deployed on Terra Classic to lock USTC. Then, Mint Cash will airdrop tokens of equal value to USTC valued at 1 USD, and the locked USTC will be destroyed.
According to Shin Hyojin, the team leader, after USTC was destroyed, the circulating supply in the market decreased, which is beneficial for USTC holders and those who support new projects. It seems to be a win-win situation for all parties involved.
Therefore, the community attributes the recent surge in USTC prices to Mint Cash's bundling strategy.
Mint Cash is a stablecoin system collateralized by BTC. It is based on the original Terra Classic codebase and is an IBC chain derived from Terra Classic. The core of the project includes the DA layer, which will be developed based on Celestia, and the nBTC protocol Nomic, which locks BTC into the Cosmos ecosystem, as well as the Anchor Protocol, which earns interest on UST savings through Luna.
Related reading: "Boosting USTC's rise by over 150% in one day, how to correctly understand the stablecoin project Mint Cash?"
Mint Cash will release a new version of Anchor Protocol called Anchor Sail, which plays a crucial role in stablecoin growth and anchoring within Mint Cash.
However, Mint Cash announced on October 8th, and to date, its Twitter followers are only over 2500, so it is still uncertain whether the airdrop rules of Mint Cash tied to USTC can really bring such a price increase to USTC.
USTC "Resurrection Proposal", Different Interpretations by the Community
Returning to the proposal in the Terra Classic governance forum, the proposal mainly aims to gradually restore the anchoring of LUNC and USTC by re-enabling the market module. Currently, the proposal has not officially started voting and is still in the discussion stage.
In order to safely re-enable the market module, the proposal suggests setting the spread fee to 98% to stabilize USTC at 2 cents and gradually increase it to 3 cents, 4 cents, etc.; then burn 100% of the spread fee instead of sending it to the Oracle pool to maintain the stable value of USTC.
In addition, the speed of burning USTC is ensured to exceed the recycling speed by limiting the size of the virtual liquidity basic pool and increasing the recovery rate, in order to prevent oversupply. At the same time, the maximum supply limit of LUNC and USTC is set to maintain the stability and controllability of currency supply.
One year ago, LUNC's pledge, IBC, and market modules were disabled due to bank runs and USTC's detachment. However, currently, the pledge and IBC have been re-enabled, while the market module remains disabled. According to the proposal, re-enabling the market module is expected to re-anchor USTC to $1 and bring income to validators and trustees through the price difference cost of LUNC/USTC exchange.
However, most people in the proposal comment section do not agree with this approach. Neon, a governance member of Terra Classic, stated that the risk-return ratio of this proposal is not proportional and even negative. It is not a plan, but rather creating a Trojan horse. He said, "Protecting the value of LUNC should be our top priority, so we must set the maximum supply limit of LUNC to the current level. If this is not feasible, then we should look for other ways."
However, another part of the community believes that this proposal is the key reason for the skyrocketing price of USTC. They believe that the proposal has taken the first step in restoring the anchor, and that its direct use of the original LUNA technical solution is information that can be understood by the market.
USTC, formerly known as UST, is the stablecoin with the highest market value on the Terra ecosystem, anchored to the US dollar at a 1:1 ratio. LUNA is the governance token of the Terra protocol, mainly used for paying gas fees, staking mining, and protocol governance on the public chain. Once the third largest stablecoin by market capitalization, UST experienced a serious price deviation from its anchor.
On May 10th, 2022, the native algorithmic stablecoin UST of the Terra ecosystem experienced a severe anchor detachment event due to capital hunting and debt crisis, dropping to a minimum of 0.6 USD.
Related reading: "84 Million Dollars Unleashes 40 Billion Financial Empire, UST Collapse"
And now, USTC seems to have re-anchored on the agenda, but the community is uncertain about the price surge of USTC and whether it can be re-anchored.
The researcher 0xLoki from Huobi Incubator believes that the proposal suggests that the USTC price will stabilize at $0.02 and gradually rise, creating an arbitrage opportunity that will cause LUNC to sell off. "So the rise of USTC is actually negative for LUNC, but USTC still needs the market liquidity of LUNC to support it, and this spiral of left foot stepping on right foot cannot be formed."
DeFi researcher @cmdefi also believes that the sharp rise in USTC price is not related to the re-anchoring proposal of Terra Classic forum, but more likely due to the new project Mint Cash and the new version of Anchor Protocol that Anchor team members will soon participate in.
However, community user @gotolab1979 believes that the proposal is a "100% copy of LUNA". The anchoring algorithms for USTC and LUNC in the proposal have not changed, only the parameter point difference has been set to 98%. He believes that even if the price of USTC stays at 0.02 USD for a long time, it can still exist as a stablecoin worth 2 cents, and this is also a reason that the market can understand why USTC has been skyrocketing.
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