Terra (LUNA) ecosystem’s algorithmic stablecoin pegged to the US dollar, UST, was supposed to hold steady at $1, but fell to $0.60 in the past day. Thereupon, Luna Foundation Guard sold a large amount of Bitcoins it held, and sent some of it to the crypto money exchange Gemini as collateral. This triggered a huge panic in the market. The danger to the Luna Foundation’s purchase of Bitcoin was previously voiced by another expert.
Luna Foundation sells Bitcoin
The Luna Foundation Guard, which acts as the treasury for the Terra project, used massive BTC inventories to re-peg the UST stablecoin to $1. In total, the Luna Foundation has allocated approximately $1.5 billion to maintain the stablecoin. As we reported on Kriptokoin.com , the UST token dropped to $0.66 with the market crash and the use of BTC helped bring the coin back to $0.91. The LUNA token has dropped over 45 percent in the last 24 hours.
The helpless measure comes at a time when the market is experiencing its worst decline. At the time of writing, Bitcoin is below $32,000, a level not seen since July 2021. Nearly all assets bled deeply in the last day, and the entire market’s value fell more than 5 percent to 1.54 trillion.
Lyn Alden had predicted the Terra threat
Lyn Alden, a prominent analyst and strategist, said that recent Bitcoin purchases by Terra (LUNA) could put Bitcoin in a bull market. He also stated that it could lead to his downfall. In the past few months, the Luna Foundation Guard, built to support Terra, has amassed $1.63 billion worth of BTC. According to Terra founder Do Kwon, a large Bitcoin purchase by Terra was due to UST.
In a Twitter post, Lyn Alden reported that if LUNA’s valuation drops sharply, it will force the organization to tap into Bitcoin reserves to keep the UST stable. In today’s post, Alden compared Terra’s selling of BTC to developing countries selling gold to protect their own currency. Alden, who shared his first thoughts on this subject last month, was shared by Tuur Demeester as follows:
Terra's multi-billion dollar algorithmic stablecoin UST blew up today.
Aside from destroying the value of $LUNA, they used their bitcoin reserves to try to defend the peg, kind of like a flailing emerging market using its gold reserves to defend its FX. https://t.co/uCfF4hmDtP
— Lyn Alden (@LynAldenContact) May 10, 2022
