People walk through the North American Bitcoin Conference held at the James L Knight Center on January 18, 2022 in Miami, Florida.
Joe Raedle | Getty Images
The Luna Foundation Guard has acquired $ 1.5 billion worth of bitcoin to bolster the reserves of its most popular stablecoin, known as US Terra.
Stablecoins are cryptocurrencies that aim to tie their market value to a more stable asset. This latest transaction from the Luna Foundation Guard brings it closer to his goal of amassing $ 10 billion worth of bitcoins to support the US Terra or UST stablecoin.
Do Kwon, co-founder and CEO of Terraform Labs, the group that launched the Terra blockchain, said he expects to hit the $ 10 billion goal by the end of the third quarter.
The reserve now holds about $ 3.5 billion in bitcoin, which puts the UST Forex Reserve in the top 10 holders of bitcoin in the world. It also holds north of $ 100 million in Avalanche, another cryptocurrency.
In its latest bitcoin acquisition this week, the Luna Foundation Guard closed a $ 1 billion OTC exchange with leading cryptocurrency broker Genesis worth UST $ 1 billion. It also bought $ 500 million worth of bitcoins from the crypto hedge fund Three Arrows Capital.
US Terra also joined the top 10 cryptocurrencies by market capitalization, according to CoinGecko.
“For the first time, you are starting to see a pegged currency that is attempting to observe the bitcoin standard,” Kwon said. “It is making a strong directional bet that keeping many of those foreign reserves in the form of digital native currency will be a winning recipe.”
“The jury is still out of effectiveness on the subject, but I think it is symbolic in the sense that we now live in an age where there is an excess of money printed across the board and where monetary policies are highly politicized. that there are citizens who organize themselves to try to bring systems back to a more solid money paradigm, “added Kwon.
Bitcoin price fell by around 5% on Thursday. moon, the governance token of the Terra blockchain, slipped by 7%. The moves came along with a large and sharp decline in stocks.
The last time the Luna Foundation Guard bought $ 1 billion in bitcoin, bitcoin surpassed $ 48,000 for the first time since December. 31 and moon have reached an all-time high.
“Corporate buying of bitcoin can greatly affect the value of the currency and the space itself,” said Joel Kruger, crypto strategist for LMAX Group. “With higher demand from institutions, liquidity and long-term interest are added, while validating the asset class at the same time.”
In addition to replenishing its reserves, the parties to the latest deal have a mission to bridge the gap between traditional finance and native cryptocurrency platforms and protocols.
“Traditionally there has been this gulf between where crypto-native market participants are participating and Terra is at the other extreme, it’s designed by crypto-native people for crypto-native people,” said Josh Lim, head of derivatives at Genesis Global Trading.
“There is another corner of the market which is mainly institutional,” he added. “They are still waiting for things like buying bitcoin, putting it in cold storage or making CME futures on bitcoin. They are very disjoint parts of the market and Genesis is trying to bridge that gap and allow more institutional capital to enter the competitive world.”
Genesis has one of the largest cryptocurrency wholesale lending businesses. By participating in this transaction with the Luna Foundation Guard, the company is building its reserves in luna and UST and is using them to interact with their loan counterparties, who may seek to gain access to the crypto ecosystem in a neutral way from the risk point of view.
It also allows Genesis to distribute some of Terra’s assets to counterparties who may find it difficult to accept those assets on the stock exchange.
“Because we’re more of an institutional counterpart they’re familiar with – by negotiating with more on the spot, OTC side of things – we are able to source it on a large scale and then distribute it to people,” Lim said.