News

UST’s Bitcoin Reserve was too late to save the dollar peg

The Luna Foundation Guard’s (LFG) projected cryptocurrency reserve to protect against the UST stablecoin’s collapse arrived too late to prevent last week’s market chaos.

UST’s Bitcoin Reserve was too late to save the dollar peg

UST’s Bitcoin Reserve was too late to save the dollar peg

The lack of a formal mechanism in place for the project’s currency reserve – supposed to prevent a crisis of confidence in UST’s dollar peg – left the stablecoin exposed to a market meltdown as digital assets dropped alongside traditional markets.

Instead, officials were forced to improvise solutions, giving $1.5 billion in bitcoin loans to keep the peg and then apparently trying to get new funding for the project.

LFG amassed a total of 70,736 bitcoins (worth over $2 billion) as an FX reserve for Terra’s algorithmic stablecoin UST, which recently suffered a catastrophic depeg and caused mayhem in the crypto market.

Luna Foundation Guard

Although LFG tried to save UST using those bitcoins, it was unsuccessful. As a stablecoin, UST is meant to be worth $1 at all times, yet it lost nearly all of its value.

A Bitcoin account affiliated with LFG transmitted around $750 million worth of Bitcoin to a new address on Monday, according to blockchain analytics firm Elliptic, only hours after LFG announced the $1.5 billion loan.

Later that evening, a total of $930 million in Bitcoin was transmitted to the same new address from numerous LFG-affiliated accounts. This total of 52,189 Bitcoin, valued over $1.6 billion, was subsequently transferred to a single Gemini account.

Terra

LFG has also withheld information about the $750 million loan, including the names of the debtors, the rate of interest, and the lender’s present state. In the midst of the UST upheaval, LFG was rumored to be seeking even more money, totaling over $1 billion, to protect the stablecoin’s peg, but then those efforts appear to have halted, since LFG has made no comments in that respect.

The testnet deployment is a few weeks away, according to Do Kwon, co-founder of Terra development firm Terraform Labs. Recently, there’s been a lot of discussion concerning algorithmic stablecoin chokepoints, with detractors claiming that they are intrinsically volatile in a market drop and prone to market players exploiting design flaws.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

Join CoinCu Telegram to keep track of news: https://t.me/coincunews

Follow CoinCu Youtube Channel | Follow CoinCu Facebook page

Jai Hamid

CoinCu News

Victor

Recent Posts

Solana memecoins crash while DTX Exchange hits 100,000 TPS on layer-1 blockchain

Discover how DTX Exchange's historic achievement of 100,000 transactions per second on a layer-1 blockchain…

21 minutes ago

Strategic Bitcoin Reserve Expected to Cut 35% of US National Debt by 2049

VanEck suggests the U.S. could reduce its national debt by 35% by 2050 through a…

27 minutes ago

The New Lead of Presidential Crypto Council Appointed by Trump Is Bo Hines

President-elect Donald Trump named Bo Hines as the executive director of the presidential crypto council.

52 minutes ago

Best New Meme Coins with 1000X Potential: BTFD Coin’s Hot BIG50 Discount As Baby Doge Coin, Dogs Takes Gaming to the Next Level

Explore the best new meme coins with 1000X potential. Learn how BTFD Coin leads with…

2 hours ago

BlockDAG Surges Past $170M as BDAG250 Bonus End Countdown Begins – Aave Targets $400 & Solana Shines with Scalability

BlockDAG crosses $170.5M in presale success with BDAG250 bonus and Whitepaper V3 launch! Solana grows…

3 hours ago

Qubetics Presale Price Surge Approaches: The Best Coins to Invest in Right Now While Toncoin, and XRP Gain Traction

Discover why Qubetics, Toncoin, and XRP are the best coins to invest in right now.…

4 hours ago

This website uses cookies.