The Luna Foundation Guard (LFG) has already bought over $1.4 billion worth of the flagship cryptocurrency Bitcoin ($BTC) to create a reserve for the Terra ($LUNA) protocol’s UST stablecoin.
While it isn’t yet clear how the BTC will be wrapped for use by the protocol, thanks to the transparency of the Bitcoin blockchain it’s possible to see how much of the flagship cryptocurrency the protocol has already bought. After blockchain sleuths identified the LFG’s BTC address, a Twitter bot tracking its purchases was created.
The bot currently shows that LFG’s BTC address has already purchased 30,727.98 BTC, equivalent to over $1.4 billion. The organization has reportedly already raised $2.2 billion to buy BTC, as CryptoGlobe reported.
Terra’s founder do Kwon has in the past suggested the Terra Protocol will be one of the largest holders of the flagship cryptocurrency as the project creates its BTC-denominated reserves to build an additional layer of security for its decentralized stablecoin. As CryptoGlobe reported, Terraform Labs has plans to accumulate $10 billion worth of Bitcoin to add to the project’s stablecoin reserves.
If the price of BTC does not move sharply in the near future, the LFG could as such end up buying around 180,000 BTC to create reserves for the UST stablecoin. It has so far been making purchases in lots of around $125 million.
Terra is a Proof of Stake (PoS) blockchain in which LUNA is used to keep the algorithmic stablecoin’s peg to the U.S. dollar. While UST isn’t backed by any assets in reserve, its value is fixed through the minting and burning of LUNA as users can always swap $1 worth of LUNA for 1 UST and vice-versa.
If the price of UST drops below $1, it can be swapped for LUNA and sold for $1, making it attractive for arbitrage traders. If it goes over the $1 mark, LUNA token holders can trade tokens for 1 UST for a profit. LUNA is minted and burned to enable these transactions.
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