Luna Foundation Guard has acquired $1.5 billion in BTC to bolster its reserve of the most popular stablecoin, U.S. Terra.
Stablecoins are cryptocurrencies designed to link their market value to more stable assets. this latest deal by Luna Foundation Guard brings it closer to its goal of accumulating $10 billion in bitcoin to back the U.S. Terra stablecoin, or UST.
Do Kwon, co-founder, and CEO of Terraform Labs, which launched the Terra blockchain, said he expects to reach the $10 billion goal by the end of the third quarter.
The reserve now holds about $3.5 billion in bitcoin, making the UST FX Reserve a top 10 bitcoin holder in the world. It also holds $100 million in another cryptocurrency, avalanche.
In the latest bitcoin acquisition this week, Luneng Fund Guard completed a $1 billion OTC deal with Genesis, a leading cryptocurrency broker, for $1 billion worth of UST. it also bought $500 million of bitcoin from cryptocurrency hedge fund Three Arrows Capital.
U.S. Terra also joined the top 10 cryptocurrencies by market capitalization, according to CoinGecko.
“This is the first time you’re starting to see a pegged currency that’s trying to adhere to the Bitcoin standard,” Kwon said.” It’s making a strong directional bet that keeping large foreign exchange reserves in the form of a digital native currency will be a recipe for success.”
“The jury is still out on the validity of this, but I think it’s symbolic because now we’re living in an era of total money printing overload when monetary policy is highly politicized and there are citizens who are organizing themselves to try to bring the system back to a more sound monetary paradigm,” Kwon added.
Cryptocurrency volatility and large institutional purchases
On Thursday, the price of bitcoin fell 9.1 percent. Luna, the governance token for the Terra blockchain, slipped 7.3 percent. The moves come at the same time as a broad and sharp decline in stocks.
The last time the Luna Foundation escrow team bought $1 billion in bitcoin, bitcoin topped $48,000 for the first time since Dec. 31 and luna hit an all-time high.
“Corporate purchases of bitcoin can greatly impact the value of the currency and the space itself,” said Joel Kruger, market strategist at LMAX Group.” With more institutional demand comes increased liquidity and long-term interest, while validating the asset class.”
In addition to filling its reserves, the parties to this latest deal are on a mission to bridge the gap between traditional finance and cryptocurrency-native platforms and protocols.
“Traditionally, there is this divide where cryptocurrency native market participants participate, and Terra is on the far end of that divide, designed by cryptocurrency natives for cryptocurrency natives,” said Josh Lim, head of derivatives at Genesis Global Trading.
“There is still a corner of the market that is largely institutional,” he added.” They’re still waiting to buy bitcoin, insert it into cold storage, or do things like CME futures on bitcoin. They are a very disjointed part of the market, and Genesis is trying to bridge that gap and get more institutional capital into the competitive world.”
Genesis has one of the largest wholesale lending businesses in the cryptocurrency space. By participating in this transaction with Luna Foundation Guard, the company is building its reserves in luna and USTs and using them to interact with their borrowing counterparties who may want to enter the cryptocurrency ecosystem in a risk-neutral manner.
This also allows Genesis to allocate some of Terra’s assets to counterparties who may have difficulty accepting them in exchange.
“Because we’re more of an institutional counterparty that they’re familiar with – with the more spot trading, OTC side of things – we’re able to source at a large scale and then distribute it to people,” Lim said.
Post time: May-06-2022