What the Luna Foundation Guard is doing with its Bitcoin reserve after UST lost its peg
- The Luna Foundation Guard announced on May 9 that it will lend out hundreds of millions of dollars in Bitcoin to defend UST peg.
- UST, Terra’s stablecoin, slipped below its intended $1 parity and plummeted to $0.990 in the last 24-hour period.
Terra’s LUNA is on a downward trajectory, analysts predict a drop to $45 within the next four weeks.
The Luna Foundation Guard (LFG) announced that it will defend stablecoin’s UST peg amig rising market volatility. The algorithmic stablecoin recently dropped below its $1 parity, and LFG is working on proactively defending the stability of the UST peg.
Terra price plummets amidst instability in UST peg
Do Kwon, the founder and CEO of Terraform labs, revealed the Luna Foundation Guard’s vote to deploy $1.5 billion in capital to allay concerns regarding the stability of UST peg. $750 million in Bitcoin and $750 million in Terra’s algorithmic stablecoin UST will be deployed to defend the latter’s peg, as market volatility rises.
1/ The LFG Council just voted to deploy 1.5B in capital (0.75B in BTC, 0.75B in UST) to allay market concerns around UST. Some more context on why and how: https://t.co/TfaAPkzgUJ
— Do Kwon (@stablekwon) May 9, 2022
The LFG council has plans to offer $750 million in Bitcoin loans to OTC trading firms to protect the UST peg and $750 million in UST to accumulate BTC until market conditions normalize. Traders will trade capital on both sides of the market and attempt to recover UST’s peg. In the last 24-hour period, UST slipped from $1 to $0.990.
In a tweet thread, the LFG council has addressed the market volatility and its negative impact on UST. The council believes it would be prudent to deploy capital on both sides of the market and maintain the parity of the LFG reserve pool that is denominated in Bitcoin.
1/ Over the past several days, market volatility across crypto assets has been significant.
— LFG | Luna Foundation Guard (@LFG_org) May 9, 2022
The market turmoil is also reflected by the past week's uncertain macro conditions across legacy asset classes.
The LFG’s attempts to aid the stability of UST peg have failed to fuel a recovery in Terra’s price. @Trader_XO, a pseudonymous crypto trader and analyst, has evaluated the Terra price trend and predicted a drop to $40-$45 level within the next four-to-six weeks.
$LUNA - $40-$45 Within next 4-6 weeks.
— TraderXO (@Trader_XO) May 9, 2022
Author
Ekta Mourya
FXStreet
Ekta Mourya has extensive experience in fundamental and on-chain analysis, particularly focused on impact of macroeconomics and central bank policies on cryptocurrencies.
