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Why The Luna Foundation Is Adding Bitcoin To Its UST Reserve?

Altcoins

www.altcoinbuzz.io 24 February 2022 12:29, UTC
  
Reading time: ~2 m

According to the announcement, LUNA Foundation has recently raised a whopping $1 billion worth of Bitcoin to serve as a reserve for its fast-rising TerraUSD (UST) stablecoin. The fund will also help improve the standing of the stablecoin in the cryptocurrency space. 

According to the tweet made on February 22nd, this private token sale is one of the largest crypto sales up to date.

1/ The long awaited [REDACTED] 💎3 is here!

📣 The Luna Foundation Guard (LFG) has closed a $1 billion private token sale to establish a decentralized $UST Forex Reserve denominated in $BTC! 📣

🧵👇

— Terra (UST) 🌍 Powered by LUNA 🌕 (@terra_money) February 22, 2022

The funds raised will provide a new reserved for UST redemption during sell-offs. According to reports, the funds were raised via an Over-The-Counter (OTC) sale of $LUNA tokens. For the uninformed, $LUNA is the native token of the Terra chain.

The recently raised funds currently stand as one of the largest fundraising activities in the crypto ecosystem. Involving investors like Jump Crypto, Three Arrows Capital, Tribe Capital Republic Capital, GSR, etc. All proceeds from the OTC sale will be used in the launch of a BTC forex reserve for TerraUSD (UST) stablecoin.

The Reason Why The Luna Foundation Created This Reserve  

This UST Forex Reserve will provide a further layer of support for the UST peg using assets like bitcoin. Therefore, this reserve can reduce the inflexibility of the system.

In other words, interested persons can easily burn an equal amount of $LUNA token to mint UST. According to LFG, the reserve will first be in Bitcoin. However, plans are in place to add other Terra non-correlated assets to the portfolio.

More About TerraUSD (UST)

TerraUSD is currently the biggest algorithmic stablecoin on Terra that has garnered huge attention in the DeFi space. Therefore, The stablecoin is currently begged 1–1 with the US dollars. And also currently has a market cap of approximately $12 billion.

Terra has been focused on building its ecosystem for quite a while now. This January, Terra made a Singapore-based non-profit organization, dubber LFG. The organization will facilitate growth and development on Terra (LUNA).

According to LFG, the $1 billion BTC reserve will serve as a UST “release valve”, especially during sell-offs. This means that the funds will ensure UST remains consistently equal 1 -1 with the US dollars, irrespective of market conditions.

$LUNA Price Outlook

At the time of writing, the price of LUNA was trading at $52.60 with a market cap of $20.1 billion and a 24-hour trading volume of $3.5 billion. The token is also down by 11.3% in the last 24 hours.


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