Terra’s parent entity Luna Foundation Guard (LFG) is engaged in a massive Bitcoin acquisition to peg BTC to its stablecoin UST. Terraform Labs founder Do Kwon recently said that he is even willing to become the second largest Bitcoin holder after Satoshi Nakamoto.
However, many people worry about future liquidity amid this heavy accumulation by a single entity. To allay these concerns, Do Kwon said Bitcoin is “liquid” enough to handle any de-pegging of its UST stablecoin. During an interview with Bloomberg Quicktale on Monday, April 4, Kwon said:
“People need to have a little more faith in crypto. If you look at Bitcoin, it turns over $20 billion a day and I think it will become even more liquid with time. Even if a stablecoin were to decline over time and those reserves were used to defend that peg. I think that (the Bitcoin market) could absorb the Bitcoin coming into the market more than easily”.
Terra plans to have $10 billion worth of Bitcoin to serve as a reserve for its decentralized UST stablecoin. The Luna Foundation Guard already completed a $1.5 billion purchase of Bitcoin last month.
TerraUSD (UST) with a different approach
Terra’s native stablecoin UST is currently the third largest by market cap. But unlike the two best stablecoins – USDT and USDC – the TerraUSD (UST) takes a different approach.
USDT and USDC are centralized stablecoin in a way that they are directly pegged to a fiat currency. On the other hand, Terra’s UST stablecoin keeps its peg by burning the LUNA tokens. A Bitcoin reserve will further help UST’s assets to maintain its dollar peg. Kwon explained:
“The most important thing to remember about Terra is that it is a decentralized stablecoin in the sense that it has no issuer. If you held some sort of centralized collateral… bonds, Tether stablecoin or (Circle’s USDC), in that case, whoever holds the largest number of these reserves would be subject to censorship and negate the whole purpose of decentralized stablecoin on the first place”.
LUNA is one of the best performing cryptocurrencies on the market. The LUNA price has risen more than 100% in the past month since the LFG started its Bitcoin purchases. At the time of writing, LUNA is trading close to its all-time high of $116 as the seventh largest cryptocurrency with a market cap of $41 billion.
The content presented may contain the personal opinion of the author and is subject to market conditions. Do your market research before investing in cryptocurrencies. The author or publication is not responsible for your personal financial loss.
About the author
Bhushan is a FinTech enthusiast and has a good flair in understanding financial markets. His interest in economics and finance draws his attention to the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In his spare time, he reads thriller-fiction novels and sometimes explores his culinary skills.
This post Terra Founder Addresses Concern Over Any Bitcoin Peg Loss To UST Stablecoin
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