Terra Raises $1 Billion To Create A Bitcoin Reserve.

February 23, 2022 - Around 2 mins mins to read

The Luna Foundation Guard has completed a $1 billion private sale in an effort to keep the TerraUSD stablecoin stable.

*Terra Raises $1 Billion To Create A Bitcoin Reserve.*

Terra announced the sale today via its Twitter account. The campaign included the selling of $1 billion in LUNA tokens, Terra’s native cryptocurrency and reserve asset.

The purchase is one of the largest sales in the crypto business to date. Jump Crypto, Three Arrows Capital, DeFiance Capital, Republic Capital, GSR, Tribe Capital, and others were among the venture capital firms engaged in the transaction.

The sale proceeds will be employed to develop a TerraUSD (UST) FX reserve denominated in Bitcoin (BTC). The reserve intends to keep the stablecoin pegged to the US dollar at a 1:1 ratio.

Do Kwon, Terra Labs’ founder and CEO, stated that the reserve fund is consistent with the project’s overall objectives:

“A decentralized economy needs decentralized money. And decentralized money needs decentralized reserves,”

Unlike rival centralized stablecoins such as Tether (USDT) and USDCoin (USDC), TerraUSD is not issued nor managed by a single entity.

TerraUSD, on the other hand, is a computational stablecoin with an arbitrage-based value. When the price of the currency falls below $1.00, users are encouraged to destroy Terra and mint LUNA, the project’s decentralized reserve coin. When the price exceeds $1.00, Terra is coined and LUNA is burned.

The reserve was set up to protect against one of the most serious risks to algorithmic stablecoins: any unanticipated black swan event that destabilizes the coin’s price peg and causes values to drop.

The Bitcoin in the deposit would allow UST owners to close any arbitrage that would have otherwise been paid with LUNA, restoring the price to its intended linkage with the US dollar.

Although the reserve now comprises just of Bitcoin, the team has not ruled out the potential of adding additional assets.

More information on the platform’s decentralized reserve mechanism will be released in the coming weeks, according to the Terra team.

With a market value of $12.2 billion, TerraUSD is the 15th biggest cryptocurrency.

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