Luna Foundation Guard (LFG) to lend $ 1.5 billion in Bitcoin (BTC) to keep UST stable

Bitcoin to rescue Terra UST stable (LUNA)

Although the Bitcoin and other cryptocurrencies watching a downward trend like all risky assets, the UST of Terra (LUNA) it fell below its benchmark value of $ 1 this weekend.

To prevent this, the Luna Foundation Guard (LFG) he revealed his action plan in a series of tweets this morning:

1 / Over the past few days, market volatility across crypto assets has been significant.
The market turmoil is also reflected by last week’s uncertain macro conditions over legacy asset classes.
– LFG | Luna Foundation Guard (@LFG_org) May 9, 2022

Therefore, the foundation will be allocated $ 1.5 billion from its reserve to offer loans on the market. This budget will be distributed in two ways. On the one hand, $ 750 million worth of Bitcoin will be lent to over-the-counter (OTC) trading companies and on the other hand, 750 million UST will be used to accumulate BTC as the market stabilizes.

According to the LFG, this will contribute to keep the price of UST at 1 dollaralthough we do not currently know more about the mechanics, which will be applied to achieve this result.

On Saturday, the UST saw its price fall to a low of $ 0.985, before stabilizing between $ 0.998 and $ 0.991:

UST / USD price in 4 hours details

👉 To go further – Discover our detailed presentation on the Terra blockchain (LUNA)

Reserve provided for such cases

If the UST is running on arbitration system by issuing and burning LUNA tokens, the LFG bitcoin reserve serves as a support to complement this functionality.

In fact, as is currently the case, sustained market movements can be in one direction or another change the price of stablecoins and precisely for this purpose this fund was created.

In recent months, we have also seen a number of announcements from the Luna Foundation Guard regarding the purchase of large amounts of BTC to build up this $ 2.89 billion reserve.

Note, however, that if this phenomenon of “pin loss” is not so rare to some extent, the other stable tires were not affected this weekend. This may also be due to the algorithmic nature of the UST, and the increasing demand for it. It will fit then look at his behavior in the next market accelerations.

👉 For the same reason – UST Terra is the 3rd most capitalized stable base, ahead of BUSD

Sources: Chart: Trade View, LFG Reserve

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About the Author: Vincent Mayor

I discovered that the world of blockchain is timid at the end of 2018 during my pursuit of financial freedom. Initially moderately invested, it was only two years later that I took the gamble of betting everything on the movement that was taking shape then. I then dedicate 2021 to better training myself to gain more knowledge and seriousness. As I often like to say: I still have a billion things to learn. And what I do know, I want to share with you.
All articles by Vincent Maire.