People walk at the North American Bitcoin Conference held at the James L. Knight Center on January 18, 2022 in Miami, Florida.
Joe Riddell | Getty Images
Luna Foundation Guard has raised $1.5 billion in bitcoin to boost the reserves of its most popular stablecoin known as US Terra.
Stable coins are cryptocurrencies that aim to peg their market value to a more stable asset. This latest deal by the Luna Foundation Guard brings it closer to its goal of accumulating $10 billion in bitcoin to support the US stablecoin Terra, or UST.
Du Kwon, co-founder and CEO of Terraform Labs, the group that launched the Terra blockchain, said he expects to reach the $10 billion target by the end of the third quarter.
The reserve now holds about $3.5 billion worth of bitcoin, which puts UST Forex Reserve in the list of the world’s top 10 bitcoin holders. It also holds $100 million in an avalanche, another cryptocurrency.
In its latest bitcoin acquisition this week, Luna Foundation Guard closed a $1 billion over-the-counter swap deal with major crypto broker Genesis for $1 billion in floor treasuries. It also bought $500 million in bitcoin from crypto hedge fund Three Arrows Capital.
US Terra has also joined the top 10 cryptocurrencies by market capitalization, according to CoinGecko.
“For the first time, I started seeing a cryptocurrency trying to stick to the bitcoin standard,” Kwon said. “It places a strong directional bet that holding a lot of these foreign reserves in the form of a digital native currency will be a winning recipe.”
“The jury is still not able to debate the effectiveness on this, but I think it is symbolic in the sense that we now live in a time when there is excess money being printed across the board and when monetary policies are so highly politicized that there are citizens enjoying themselves-regulation to try to bring systems back to a sounder model from money “.
Crypto fluctuations and large institutional buyouts
On Thursday, the price of Bitcoin fell about 5%. Luna, the governance token on the Terra blockchain, is down 7%. The moves occurred in tandem with a sharp and broad drop in stocks.
The last time Luna Foundation Guard bought $1 billion in bitcoin, bitcoin topped $48,000 for the first time since December 31 and Luna hit an all-time high.
“Businesses buying bitcoin can significantly affect the value of the currency and the space itself,” said Joel Krueger, crypto strategist for LMAX Group. “With increased demand from institutions comes additional liquidity and long-term benefits, while validating the asset class at the same time.”
In addition to stuffing their reserves, the parties to this latest deal are on a mission to bridge the gap between traditional finance and native crypto platforms and protocols.
“There has traditionally been this gap between where participants are in the cryptocurrency market, and Terra at the far end of that being designed by crypto natives for crypto owners,” said Josh Lim, Head of Derivatives at Genesis Global Trading.
He added, “There is another corner of the market, most of which are institutions.” “They are still waiting for things like buying bitcoin, going into cold storage, or executing CME futures on bitcoin. They are very disjointed parts of the market and Genesis is trying to bridge that gap and allow more institutional capital to enter the competitive world.
Genesis owns one of the largest wholesale lenders in the cryptocurrency space. By participating in this transaction with Luna Foundation Guard, the company is building its reserves in Luna and UST and using them to interact with peer borrowers, who may be looking to access the crypto ecosystem in a risk-neutral manner.
It also enables Genesis to distribute some of Terra’s assets to counterparties who may have difficulty accepting those assets on the exchange.
“Because we’re more of a institutional party they’re familiar with — we trade with more at once, the OTC side of things — we’re able to get this at a high volume and then distribute it to people,” Lim said. .