LFG to deploy $1.5 billion to bolster UST peg and build BTC reserves

Amid the crisp pullback crossed Bitcoin (BTC) and the wider crypto marketplace this week, the Luna Foundation Guard (LFG) is acceptable to deploy $1.5 cardinal worthy of superior to “help protect” Terra USD’s peg to the U.S. dollar.

The Singapore-based nonprofit LFG is portion of the Terra (LUNA) ecosystem and is tasked with collateralizing the network’s algorithmic stablecoin UST to support its USD peg intact, portion besides managing the network’s reserves.

While details are sparse astatine this stage, the LFG outlined connected Twitter earlier contiguous that it volition archetypal indebtedness retired $750 cardinal worthy of BTC to over-the-counter (OTC) trading firms to negociate and commercialized the capital.

Following connected from this, erstwhile the marketplace has stabilized, the LFG volition get a 750 cardinal UST indebtedness — astir apt from Terraform Labs — to re-balance its reserves.

The LFG noted that the assembly voted to execute the program aft observing “significant” market volatility crossed BTC, UST and LUNA implicit the past respective days.

— LFG | Luna Foundation Guard (@LFG_org) May 9, 2022

Providing further mentation connected the move, Terraform Labs laminitis Do Kwon emphasized connected Twitter that “LFG is not trying to exit its Bitcoin position” and is yet deploying the superior successful the abbreviated word to fortify UST successful the abbreviated word volition upping its BTC holdings agelong term.

“While buys and sells of UST are not meaningfully directional now, we felt it was invaluable to person superior acceptable to beryllium deployed successful the existent market. As markets recover, we program to person the indebtedness redeemed to america successful BTC, expanding the size of our full reserves.”

1/ The LFG Council conscionable voted to deploy 1.5B successful superior (0.75B successful BTC, 0.75B successful UST) to allay marketplace concerns astir UST. Some much discourse connected wherefore and how: https://t.co/TfaAPkzgUJ

— Do Kwon (@stablekwon) May 9, 2022

As the LFG’s $2.91 cardinal reserves are chiefly backed by BTC (91% oregon $2.7 billion) the declining terms of assets is forcing the entity to readjust its equilibrium expanse to support UST’s peg. At the clip of writing, BTC is down 12.7% implicit the past 7 days to beryllium astatine astir $33,600, portion UST is somewhat disconnected its peg astatine $0.99.

Related: Bitcoin clings to $36K arsenic information suggests BTC terms sell-off came from short-term holders

Terra’s autochthonal plus LUNA, which besides plays a portion successful maintaining UST’s peg via its burning and minting mechanism, has suffered significantly implicit the past week arsenic well, dropping a hefty 24.5% to beryllium astatine $62.15.