Terra founder reveals what will happen to UST if Bitcoin price crashes

Terraform Labs CEO Do Kwon has conceded that a clang successful the terms of Bitcoin would beryllium “negative” for the stableness of the UST stablecoin, but that helium expects Bitcoin to spell up.

Terraform Labs is the entity down the Terra (LUNA) blockchain level which plans connected buying a total of $3 cardinal successful Bitcoin arsenic a reserve for the UST stablecoin.

Kwon made the comments successful an interrogation connected the Unchained podcast connected Mar. 29. Host Laura Shin asked Kwon what the abbreviated word implications of holding truthful overmuch BTC volition beryllium for the stableness of UST.

Kwon said “the worst lawsuit would beryllium if we were buying Bitcoin and a clang happens six months later, and it’s correlated with a monolithic autumn successful request for UST” which would be, arsenic helium modestly enactment it, “negative.” However, that script isn't keeping him up astatine night:

“I’m benignant of betting that the agelong word script of Bitcoin going up and the reserves being beardown capable to withstand UST request drops is the much apt scenario.”

Kwon has been buying Bitcoin (BTC) to clasp successful Terra’s treasury arsenic 40% of the collateral for the UST stablecoin. So far, Terra has acquired 30727.9 BTC, and astir recently purchased 2,943 BTC connected Mar. 29. This makes Terra the 3rd largest single-wallet BTC holder.

Crypto YouTuber danku_r argued to his 54,000 followers successful a Mar. 30 tweet that the summation of BTC to Terra’s treasury would assistance mitigate the interaction of a abrupt retraction successful UST demand. He said that Terra’s determination would assistance avert a “death spiral owed to marketplace uncertainty” by helping the treasury “swallow the proviso contraction of UST.”

One of Kwon’s stated goals for the treasury, known arsenic the Luna Foundation Guard (LFG) is to marque Terra “the largest single-wallet holder of BTC.” In bid to dethrone the existent leader, Michael Saylor’s MicroStrategy, Kwon volition request to amass much than 125,051 BTC according to Bitcon wallet tracker Bitcoin Treasuries.

— Laura Shin (@laurashin) March 31, 2022

Later successful the interview, Kwon lived up to his estimation arsenic a provocateur by proclaiming that Terra is simply a Layer-2 solution for the Bitcoin network. He argued that with Terra, Bitcoin has a span that allows it to beryllium utilized “across a multitude of applications from DAOs to NFTs to DeFi.”

“And successful presumption of the expressivity, the transaction capabilities, the throughput, each those things tin hap connected Terra.”

Related: ‘Hold my beer’ — Terra already up $165M from buying Bitcoin arsenic BTC stash nears Tesla’s

Kwon’s remark drew the attraction of the crypto community. In a tweet, Ethereum (ETH) developer antiprosynthesis responded by asking if each entities that usage BTC to backmost a stablecoin should beryllium considered Layer-2 solutions. He said, “Even I don't judge that Bitcoin's standards person plummeted to specified extent.”

A Layer-2 solution helps a Layer-1 blockchain to standard up its operations by moving galore transactions to an alternate web to trim congestion.

BTC is trading astatine $44,463, down 5.61% implicit the past 24 hours according to Cointelegraph Price Index.