Luna Foundation Guard Raises $1 Billion to Form a Bitcoin-Denominated UST Reserve

The open source stablecoin network-focused nonprofit organization behind Terra USD, Luna Foundation Guard, has closed a $1 billion raise through the sale of LUNA tokens.

In a Tuesday tweet, Terra said that Jump Crypto and Three Arrows Capital led the $1 billion round with participation from DeFiance Capital, Republic Capital, GSR, Tribe Capital and others. The platform said proceeds from the sale, $1 billion, “will go towards establishing a Bitcoin-denominated currency reserve for UST,” a stablecoin in the Terra ecosystem.

“A common criticism of algorithmic stablecoins is their reflexive nature and the hypothetical risk of a “bank run” scenario in which demand to sell the stablecoin outstrips supply in a way that causes a compound price decline in both tokens. native people”Terra said. “Although the widespread adoption of UST as a consistently stable asset through market volatility should already refute this, a decentralized Reserve may provide an additional avenue for holding the peg in down cycles that reduces system reflexivity.”

Terra said that he chose to denominate the Reserve Currency in Bitcoin (BTC) because it considered the cryptoasset “less correlated with the Terra ecosystem.” The platform said that more details about the operation and design of the UST reserve will be released in the coming weeks.

The protocol website said which uses “the basic market forces of supply and demand” to maintain a stable price for currencies, including UST:

“Stablecoins are only valuable to users if they keep their price fixed […] When the demand for Terra is high and the supply is limited, the price of Terra increases. When the demand for Terra is low and the supply is too large, the price of Terra decreases.”

Headquartered in Singapore, the Luna Foundation Guard, or LFG, launched in January to grow the Terra ecosystem and improve the sustainability of its stablecoins. On February 18, Terraform Labs founder Do Kwon announced the injection of 450 million UST, approximately USD 450 million- in the reserves of the Anchor protocol after a vote of the LFG.

At press time, the price of Terra (MOON) is $54.03, having risen over 1.7% in the last 24 hours. The network reached an all-time high of over $20 billion total value locked in December 2021.

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