Luna Foundation Guard uses $750 million in Bitcoin to secure value for UST

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2022-05-13 08:32:21

Terra’s UST escrow fund, Luna Foundation Guard, suddenly announced that it would market a large amount of Bitcoin and UST to protect the price of this stablecoin.

UST had a volatile Sunday when the price of LUNA fell sharply, causing the UST to lose the 1 USD mark (de-peg), sometimes falling to 0.9857 USD.

Specific developments:

  • A large amount of UST sold off on Curve
  • Rumors spread quickly on Twitter
  • Make 2 billion UST withdrawn from Anchor
  • LUNA price plummeted
  • UST is depeg to 0.987
  • The price rose to 0.995 again after Do Kwon reassured the community
  • Jump Fund sells off assets to buy UST

So far, UST is still struggling around the $0.995 area and has not been able to return to the old price level of $0.999 before being de-peg.

Current price chart of stablecoin UST May 9, 2022

At noon on May 9, the Luna Foundation Guard (LFG), a reserve fund created to secure the price of UST, announced that it would move $750 million in Bitcoin and 750 million UST outside the market for the purpose of stabilizing the price. for this stablecoin.

The LFG announcement referred to the transaction in words as “lending”. Specifically, LFG will lend an OTC unit $750 million in Bitcoin and 750 million UST to perform market operations related to UST. The total value of this amount is 1.5 billion USD and the identity of this OTC organization has not been disclosed.

Previously, on May 5, Luna Foundation Guard purchased an additional $1.5 billion in Bitcoin from Three Arrows Capital. This event increased the amount of assets that LFG held at that time to about $3.5 billion, including $3 billion in Bitcoin and $500 million in other coins such as USDT, USDC and AVAX.

This is the first time that LFG has brought out a large amount of Bitcoin after continuously accumulating for the past 3 months.

LFG’s act of selling Bitcoin this time is contrary to the mission statement on their website. Luna Foundation Guard said that the goal of the reserve fund is to give investors the option of converting UST to other currencies such as BTC in case UST loses its 1-for-1 peg to the USD. This also relieves pressure on the LUNA token, avoiding the case of dragging the price of both down.

The reason for LFG’s decision this time is that the fund wants to reduce the supply of UST in the market to help this stablecoin return to the $1 mark. The amount of Bitcoin assets that LFG is holding is the only option for them to deploy during the current market downturn.

The fund’s asset statistics page has not shown a change in the asset ratio, but the total value has decreased to $ 2.9 billion after the last period, the fund’s Bitcoin holdings are only worth 2 $7.7 billion.

LUNA price in the past 24 hours continued to plummet to $59.40 USD, while UST was still struggling around the $0.995 mark.

Corrective tweet from Terra founder, Do Kwon

Terraform Labs CEO Do Kwon then clarified about the above “lending” agreement, asserting that the BTC loan amount has not yet been sold and this transaction should be considered as an OTC fund that will use the money to “ market equilibrium” rather than “selling BTC”.

Mr. Do Kwon also acknowledged that the actions of Luna Foundation Guard were decided by a few individuals in the fund’s board of directors (including him) and not through the Terra community because the governance mechanism is still under construction. .

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