May 18, 2022: -Investors are waiting eagerly to find out what happened to the $3 billion in bitcoin brought up by crypto firm Terra to back its failed stablecoin.
On Monday, Luna Foundation Guard by Terra creator Do Kwon said it spent nearly all of the bitcoin in its reserve in the previous week to attempt terraced or UST.
The foundation had collected over 80,000 bitcoins, worth virtually $3 billion in the previous week, and other tokens, which include BNB, tether, USDC, and avalanche. Kwon promises to use the bitcoin in a dramatic decrease in UST value.
In a series of tweets, Luna Foundation Guard said it transferred 52,189 bitcoins to “trade with a counterparty” as UST decreased less than its intended $1 peg. The foundation noted that Terra sold over 33,206 bitcoins in a last made effort to defend the peg.
On Monday, Luna Foundation Guard had 313 bitcoins left in its reserve, worth $9.3 million. The firm said it would use the remainder of its $85 million in crypto assets, which include BNB and avalanche, to “compensate remaining users” of UST.
“We are still debating through many distribution methods; updates to follow soon,” Luna Foundation Guard said.
UST is what’s known as an “algorithmic” stable coin. Unlike tether and USDC, which hold fiat assets in reserve to back their tokens, UST relied on a complex set of codes, coupled with a floating pass called luna, to balance supply and demand and stabilize the price.
When UST started decreasing below $1 in the previous week, luna also started to sell off, which resulted in a vicious cycle that caused UST to drop to shorter than 30 cents while luna became weak. UST is currently worth just 9 cents, according to CoinGecko data.
“The big problem when dealing with a collateralized stablecoin like UST is that your hard collateral bitcoin will be considerably more valuable than your governance token,” luna said, an independent economist.
Blockchain analytics firm Elliptic has estimated holders of UST and luna are losing $42 billion in the previous week. Analysis from the company shows that 52,189 bitcoins were moved to a single account at crypto exchange Gemini, while 28,205 bitcoins were transferred to Binance.
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