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.

The market turmoil is also reflected by the past week's uncertain macro conditions across legacy asset classes.
— LFG | Luna Foundation Guard (@LFG_org) May 9, 2022

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

Share: Cryptos feed

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.