Bitcoin has fallen below $26,000 since December 2020. (Photo credit should read CFOTO/Future Publishing via Getty Images)
CFOTO | Future release via Getty Images
Investors were excited to see what happened to the more than $3 billion worth of bitcoin bought up by crypto firm Terra to shore up its failed stablecoin. Now they have their answer.
Luna Foundation Guard, a fund founded by Terra creator Do Kwon, said Monday It spent almost all of the bitcoin in its reserve last week to rescue terraUSD — or UST for short.
The foundation had amassed a total of more than 80,000 bitcoins last week, valued at over $3 billion. Kwon had promised to use the bitcoin in case of a dramatic drop in value of UST.
In a series of tweets, Luna Foundation Guard said it transferred 52,189 bitcoin for “trading with a counterparty” when UST fell below its intended $1 peg. Another 33,206 bitcoins were sold directly by Terra to defend the peg, the foundation said.
As of Monday, Luna Foundation Guard had just 313 bitcoins left in its reserve, worth about $9.3 million. The company said it will use the rest of its wealth – which includes some other digital tokens like BNB and Avalanche – to “compensate” “remaining users” of UST.
“We are still discussing different distribution methods, updates coming soon,” Luna Foundation Guard said.
UST is a so-called “algorithmic” stablecoin. Unlike Tether and USDC, which hold fiat assets in reserve to shore up their tokens, UST relied on a complex mix of code combined with a floating token called Luna to balance supply and demand and price stabilize.
When UST started falling below $1 last week, Luna also started selling, creating a vicious cycle that resulted in UST crashing to less than 30 while Luna became worthless. UST is now worth just 9 cents, according to CoinGecko data.
The collapse of Terra’s tokens has spread across crypto markets, wiping out more than $200 billion in wealth in a single day. Bitcoin briefly tumbled below $26,000 on Thursday, its lowest level since December 2020.
https://www.cnbc.com/2022/05/16/what-happened-to-the-bitcoin-reserve-behind-terras-ust-stablecoin.html What happened to the bitcoin reserve behind Terra’s UST stablecoin?