As TerraUSD (UST) plummets in value, the Luna Foundation Guard says it’s preparing $1.5 billion in Bitcoin and UST to address market concerns about the stablecoin.
UST, a stablecoin designed to be pegged to the US dollar (USD), is trading for $0.75 at time of writing, down more than 24% in the past day.
Though designed to keep an equal value to the USD, UST first fell below $1.00 on Saturday before collapsing on Monday.
“As a result, the LFG Council has voted to execute the following:
– Loan $750 million worth of BTC to OTC [over-the-counter] trading firms to help protect the UST peg.
– Loan $750 million UST to accumulate BTC as market conditions normalize.
The traders will trade the capital on both sides of the market to help accomplish both #1 and #2, eventually maintaining parity of the LFG Reserve pool (denominated in BTC) as market conditions progressively stabilize.”
Terraform Labs CEO Do Kwon announced a plan back in mid-March to accumulate $10 billion worth of Bitcoin reserves as part of an effort to back TerraUSD. The LFG purchased more than $1.6 billion worth of BTC, but it has completely emptied that wallet in the past day, according to BitInfoCharts.
Kwon maintains, however, that the LFG “is not trying to exit its Bitcoin position.”
“The goal is to have this capital in the hands of a professional market maker such that:
1) Buy UST if price < peg
2) Buy BTC if price >= peg
Thus significantly strengthening the liquidity around UST peg.
While buys and sells of UST are not meaningfully directional now, we felt it was valuable to have capital ready to be deployed in the current market.
As markets recover, we plan to have the loan redeemed to us in BTC, increasing the size of our total reserves.”Don't Miss a Beat – Subscribe to get crypto email alerts delivered directly to your inbox
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