Terraform Labs donates $880 million in LUNA to the Luna Foundation Guard

$880 million for the Terra ecosystem

Terraform Labsthe organization behind the UST, the stablecoin of Terra, has made a “gift” of $880 million in the form of LUNA to the Luna Foundation Guard (LFG) this Thursday.

TFL has gifted an additional 10 million $LUNA to the @LFG_org. https://t.co/tNirkgGGm0

— Terra (UST) ? Powered by LUNA ? (@terra_money) April 14, 2022

The Luna Foundation Guard is responsible for ensuring the reserves and the balance of the UST to keep its price pegged to the US dollar. Do Kwonthe founder and CEO of Terra, announced last month that he wanted to build a reserve of 10 billion dollars in the form of Bitcoin (BTC) in particular in order to ensure the UST.

A huge number, but which remains proportional to the growth experienced by the ecosystem of Terra : the LUNA occupies the 9th place in the ranking of cryptocurrencies with 29 billion market capitalizationand the UST occupies the 14th place with $17.2 billion. The success of the UST is notably due to the Anchor protocol that we no longer present, which currently provides a return of 19.5% on the stablecoin.

This new influx of funds comes just a few days after the Luna Foundation Guard must be equipped with 4,130 BTCor $176 million at the time of the transaction, in order to fill its safe.

With 42,530 BTC, Terra now holds the third largest bitcoin wallet of the entire ecosystem behind MicroStrategy and Teslarespectively first and second in the standings.

Fig. 1: Ranking of companies with the largest Bitcoin reserves

At the current price, Terra’s Bitcoin cash currently represents $1.7 billion. According to Do Kwon, the next step for Terra is to own some for $3 billion in total value.

? Read: What is a stablecoin?

Terra’s Cash Strategy

First of all, in order to deepen the way in which the treasury of Terra is constituted, it is worth recalling how its ecosystem works.

LUNA, Terra’s tokenis not a stablecoin and is therefore inherently subject to unpredictable market volatility. In order to keep the UST pegged to the dollar, Terra burns (burn) LUNA tokens to rebalance the UST price when the latter is subject to slight fluctuations.

However, in order to avoid a critical devaluation of the LUNA tokens in the event that a large number of people decide at the same time to exchange their UST for LUNA, Terra has decided to diversify its treasury assets.

Fig. 2: Luna Foundation Guard Treasury Asset Allocation

Bitcoin, which is by nature better structured and more established than LUNA due to its seniority, therefore now provides the largest share of the LFG’s cash. As shown in the figure above, the foundation also holds 398.6 million USDC and 151.2 million USDT.

To further diversify its reserves in order to consolidate in the face of volatility in the cryptocurrency marketTerra is also planning to add $100 million from AVAXthe cryptocurrency of the Avalanche blockchain, to its treasury.

?To go further: MicroStrategy buys back $190 million worth of Bitcoin (BTC)

Source: CoinGecko

Image sources – Fig. 1: bitcointreasuries.net, Fig.2: LFG Reserves