As TerraUSD (UST) drops in value, the Luna Foundation Guard says it has $1.5 billion in Bitcoin and UST prepared to address market concerns regarding the stablecoin clear out.
UST, a stablecoin that is set to be pegged to the US dollar (USD), is trading for $0.75 at the time of writing, down more than 24% over the past day.
Despite being designed to hold the same value as the USD, UST initially fell below $1.00 on Saturday before collapsing on Monday.
The LFG, a non-profit organization formed to support the Terra (LUNA) ecosystem, says it will “proactively defend the stability of the UST bond and the broader Terra economy.”
“As a result, the LFG Council has decided to implement the following:
– Lend $750 million worth of BTC to OTC [over-the-counter] Trading companies to help protect the VAT bond.
– $750 million loan to accumulate BTC when market conditions normalize.
Traders will trade capital on both sides of the market to achieve both #1 and #2 and eventually maintain parity in the LFG reserve pool (denominated in BTC) as market conditions become increasingly stable.”
Terraform Labs CEO Do Kwon announced back in mid-March a plan to amass $10 billion worth of bitcoin reserves to support TerraUSD. The LFG bought more than $1.6 billion worth of BTC but completely emptied that wallet over the past day, according to BitInfoCharts.
However, Kwon claims that the LFG is “not attempting to exit its Bitcoin position.”
“The goal is to have this capital in the hands of a professional market maker so that:
1) Buy UST when price
2) Buy BTC when price >= Peg
This will significantly strengthen liquidity around the UST peg.
While buying and selling UST currently has no meaningful direction, we felt it was valuable to have capital to deploy in the current market.
When markets recover, we plan to have the loan repaid to us in BTC, which will increase our overall reserves.”
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Source: Crypto News Deutsch