Do Kwon, the founder of Terra, promised to use the Bitcoin of the LFG if the value of UST dropped to defend its parity. The crash of the Terra ecosystem caused UST to fall below 30 US cents while LUNA lost 99.8% of its value.
Many investors want to know what happened to the USD 3 billion worth of Bitcoin acquired by the Luna Foundation Guard (LFG). The organization aimed to back the stablecoin UST with those funds if a crash like the recent one occurred.
The LFG is an organization that monitors the Bitcoin reserves of the Terra ecosystem. They recently said that it spent 99% of its BTC holdings in an effort to save the stablecoin UST.
Last week, the LFG accumulated over 80,000 BTC, equivalent to nearly USD 3 billion, alongside other tokens like BNB, Tether, USDC, and AVAX. Do Kwon, the founder of Terra, had also promised to use the Bitcoin of the organization if the value of UST dropped.
On Twitter, the LFG said it transferred 52,189 BTC to trade with a counterparty as UST dropped below its face value. They added that they sold another 33,206 BTC trying to defend the parity of UST.
Early this week, the LFG only had 313 BTC, worth around USD 9.3 million, in its reserve. They also stated they would use the rest of their USD 85 million in crypto assets to compensate the remaining UST users.
In that regard, they highlighted on Twitter that they would start by compensating smallholders. They pointed out that they discussed various distribution methods and will post updates soon.
UST Is the Algorithmic Stablecoin of Terra
The UST token is an algorithmic stablecoin different from USDT and USDC, which hold fiat assets to back their tokens. UST relied on a complex set of codes and its linked token (LUNA) to maintain the UST supply and demand balance.
The price of LUNA collapsed when UST began to drop below USD 1. Consequently, UST fell below 30 US cents while LUNA lost 99.8% of its value.
UST is trading at around USD 0.075492 and has accumulated a 90.3% loss over the last seven days. While its trading market is above USD 218.23 million, its market capitalization is about USD 849.93 million, according to CoinGecko.
Do Kwon recently brought forward a revival plan proposing the possibility of forking the network and restoring ownership to 1 billion tokens. LUNA token has a circulating supply of over 6.5 billion, compared to 340 million before the sharp drop.
Binance CEO Changpeng Zhao criticized the proposal of Kwon, arguing that the fork gives no value to the Terra ecosystem. In addition, he described it as wishful thinking, saying it is impossible to reverse all transactions.
Terra struggled to save UST, but they could not avert the collapse of the stablecoin. Furthermore, the remarks of LFG further lowered investor expectations. Although the LFG stated that it would reward the victims of the fall of UST, it has not reported the methodology.
By Alexander Salazar