The founder of popular altcoin projects Terra (LUNA) claimed that “Terra Protocol will be one of the biggest holders of BTC”. Terra’s founder recently suggested that Terra Protocol will become one of the largest holders of its flagship cryptocurrency Bitcoin (BTC), as the project creates Bitcoin-denominated reserves as an additional layer of security for its decentralized stablecoin UST. Detail cryptocoin.com‘in.
This altcoin creates reserves in BTC
Earlier this year, the Luna Foundation Guard (LFG) announced that it has raised $1 billion through a private token sale to create a Bitcoin reserve whose value is pegged to the US dollar. LUNA is used to keep the algorithmic stablecoin pegged to the US dollar. While UST is not backed by any assets in the reserve, its value is fixed by minting and burning the LUNA, as users can always trade $1 worth of LUNA for 1 UST and vice versa.
If the price of UST drops below $1, it can be traded for LUNA and sold for $1, making it attractive to arbitrage traders. If it exceeds $1, LUNA token holders can trade the tokens for 1 UST for profit. The so-called decentralized finance researcher Westie explained that during periods of social media downturn, this mechanism could lead to a “death spiral.” Bitcoin’s value is less correlated with Terra’s ecosystem. Therefore, BTC reserves are expected to reduce the risk of a death spiral.
Terra is probably one of the biggest BTC holders
In a tweet, Do Kwon suggested that Terra Protocol will likely become one of the biggest holders of BTC through its reserve. In his tweet, Kwon tagged MicroStrategy CEO Michael Saylor as the publicly traded business intelligence firm that has amassed 125,051 BTC worth over $5.4 billion. The price of UNA rose after the BTC reserve was announced. The data shows that at the time of writing, the price is close to $93, an all-time high of $103.
According to Binance Research, Terra is a Proof of Stake (PoS) blockchain. They also say that LUNA is “used for issuing stablecoins (TerraSDRs), as a price stabilization mechanism, as well as for staking and network governance.” Terra was developed by South Korean blockchain company Terraform Labs, founded in January 2018 by Danial Shin and Do Kwon.
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