Cryptocurrency News

Luna Foundation Guard Launches $1 Billion TerraUST Stablecoin Reserve Fund; LUNA Jumps Over 10%

By February 23, 2022 No Comments

Key takeaways:

  • The Luna Foundation Guard has launched a BTC-denominated UST Forex Reserve
  • The capital for the newly-launched $1 billion stablecoin reserve fund was raised in a private sale of LUNA tokens
  • The UST reserve fund will mitigate the risk of a “bank run” scenario

The Luna Foundation Guard (LFG), a non-profit organization launched earlier this year to ensure the stability of the TerraUSD (UST) stablecoin peg and boost the Terra ecosystem’s growth, has raised $1 billion for a UST reserve fund. 

LFG raised $1 billion for the UST Forex Reserve through private LUNA sale 

The new, Bitcoin-denominated stablecoin fund will ensure that UST’s algorithmically-controlled peg doesn’t run amok if demand outstrips supply, or vice-versa.

The $1 billion LUNA token private sale was led by Jump Crypto and Three Arrows Capital and saw participation from several other prominent alternative venture capital firms. According to the Terra team, the recently concluded sale was one of the largest of its kind in the industry.

The Terra team wrote on Twitter that the new reserve fund will help prevent the so-called “bank run” scenario, which can occur when a large number of users withdraw their funds, causing a price decrease in the value of the underlying asset.

The team behind the bustling DeFi ecosystem added that the UST Forex Reserve will “provide a further layer of support for the $UST peg using assets that are considered less correlated to the Terra ecosystem, like Bitcoin.”

The ecosystem’s two largest tokens – LUNA and UST – are entirely intertwined, both in terms of their market value and blockchain underpinnings. Users are able to mint UST stable digital currency by burning LUNA tokens and create new LUNA by burning UST.

Earlier in the month, Terra’s founder Do Kwon announced that the company will be injecting $450 million worth of UST into the Anchor Protocol, Terra ecosystem’s leading lending service. 

According to blockchain analytics firm DeFi Llama, the total value locked (TVL) in decentralized finance (DeFi) application on Terra’s blockchain increased from $53.6 million at the beginning of 2021 to a whopping $17.4 billion at the time of this writing. Terra currently boasts the second-highest TVL in the industry and is trailing only Ethereum, with an insurmountable TVL of $119.8 billion.

The price of LUNA increased to $59.61 on the news of the reserve fund being launched, gaining more than 12% in the last 24 hours.