LFG Raises $1B in a Private Sale Round to Establish a $UST Reserve in Bitcoin (BTC)

Luna Foundation Guard, a non-profit organization linked to Terra, has announced the completion of a private sale round claiming to have raised $1B to back UST. It aims to start a “UST Forex Reserve denominated in Bitcoin.”

LFG to Add Reserve Options for UST

Yesterday, LFG claimed to have raised $1B to back UST in a private token sale round. The sale was spearheaded by Three Arrows capital. It wants to build the reserve in a denominated way in BTC. However, it did not confirm the nature of the funds received. If the money was raised in BTC, it could be lower than $1B now, given that Russia-Ukraine woe is affecting the market.

Terra’s UST is a USD pegged algorithmic stablecoin backed by LUNA. This method of backing is excellent but also very risky in that the stablecoin may lose its peg where LUNA losses value, thus not matching the needs of traders. From the history of cryptocurrencies, some algorithmic stablecoins which lacked fiat backing lost their peg when the demand was too high.

LFG explained in their press release that one of the drawbacks of algorithmic stablecoins is their tendency to lose pegs during extremely volatile market conditions. Mostly, efforts to maintain the peg ends up failing. Therefore, the new UST Forex Reserve will serve as a precaution to maintain the coins peg in highly volatile markets. 

“The UST Forex Reserve further strengthens confidence in the peg of the market’s leading decentralized stablecoin UST,” said Kanav Kariya, President of Jump Crypto. “It can be used to help protect the peg of the UST stablecoin in stressful conditions. This is similar to how many central banks hold reserves of foreign currencies to back monetary liabilities and protect against dynamic market conditions.”

Terra’s UST to Benefit From LFG’s Latest $1B Raise

LFG wants to use the BTC denominated reserve to diversify Terra’s ecosystem and act as a release valve for UST. It explained that UST would have a chance at survival against massive sell-offs by dipping into the reserve, thus maintaining its peg. It also hinted that it would add other assets to the reserves unrelated to the Terra ecosystem.

According to the organization, Three Arrows, Jump Crypto, and the other buyers in the $1B token sales will be subjected to LUNA’s four-year vesting period. They took that measure to ensure that the participants couldn’t sell the coins at once to the open market. However, they did not offer more information regarding the vesting plans.

Stablecoins Dominate in Crypto Adoption

UST is one of the most popular stablecoins around. Last year its value rose from under $1B in Total Value Locked (TVL) to an ATH of over $20B in December. It also overtook USDT in trading volume on ETH some time ago. 

In general, this iteration of coins has been stealing the show over the past months. Their rise in popularity among crypto traders and businesses even shook the US, with some lawmakers proposing strict regulations. Most enterprises prefer stablecoins as they have fixed prices and are thus safe from significant market variations.

Currently, the total market cap of stablecoins has breached the $180B mark occupying over 11% of the crypto market.