LUNA (Terra) is the only coin from the TOP 10 that managed to update the historical maximum in March. At the same time, the co-founder of the company Do Kwon mentioned at the end of last week about plans to purchase Bitcoin for $ 10 billion to ensure the reserve of a stable UST coin. This led to the growth of Bitcoin by 7%.
UST is an algorithmic stablecoin of the Terra network pegged to the US dollar in the ratio of 1:1. Unlike Tether or USDC, the company does not use reserves in currency or other assets to ensure liquidity, instead, the UST money supply is linked to the LUNA coin. With a shortage of UST, LUNA validators receive an additional reward, and with an excess of UST, part of LUNA is burned.
The system is well balanced and has already proved its viability in the crisis of third-party projects using UST.
However, the company decided to strengthen the position of the stablecoin, adding a reserve of Bitcoin for $ 10 billion. This amount is designated as the final goal, at the first stage, the $3 billion available in the funds will be used.
In the case of a $3 billion purchase, Terra will become the world’s second largest known Bitcoin holder. At current prices, the company’s reserve will amount to 68 thousand BTC, only MicroStrategy (NASDAQ:MSTR) has more with a reserve of 125 thousand BTC. Bitcoin Magazine has published data on the beginning of replenishment of Terra reserves of cryptocurrency – two tranches have already been made for a total of $ 250 million.
After the formation of the necessary reserve, Bitcoin, as well as LUNA, will become a balancing coin to ensure the liquidity and stability of UST. Do Kwon promised to reveal in more detail the mechanics of the interaction between stablecoin and Bitcoin in the near future.
Terra’s main goal is to create a reliable bridge between fiat and cryptocurrencies. UST is already No. 1 among algorithmic stablecoins (the issue does not depend on the will of the publisher), but it is inferior in capitalization to such centralized offers as USDT, USDC and BUSD. The creation of a reserve will allow Terra to gain even more trust and enter the TOP 3 stablecoins in the near future.