Terra Plans $750M Bitcoin “Loan” To Market Makers To Defend UST Peg
© Reuters. Terra Plans $750M Bitcoin “Loan” To Market Makers To Defend UST Peg
The Luna Foundation Guard (LFG) plans to lend $750 million (CRYPTO:BTC) to market makers as part of a broader strategy to protect the UST stablecoin peg.
What happened: Blockchain stablecoin (CRYPTO:LUNA) TerraUSD (CRYPTO:UST) briefly lost its peg to the US dollar on Saturday in what the community described as a “coordinated attack.”
Events over the weekend prompted the LFG Council to come up with a way to resolve the issue.
The blockchain said it plans to lend $750 million worth of BTC to OTC trading firms to protect the UST peg and lend $750 million UST to accumulate BTC as conditions normalize.
5/ Traders will exchange capital on both sides of the market to help accomplish both #1 and #2, possibly maintaining LFG reserve pool parity (denominated in BTC) as market conditions gradually stabilize .
— LFG | Luna Foundation Guard (@LFG_org) May 9, 2022
Market participants interpreted the announcement as a way to save face and justify selling Bitcoin. For context, Terra has been steadily acquiring BTC for its reserves over the past month to turn its UST algorithmic stablecoin into one that is backed by Bitcoin.
Very likely PR. Selling BTC would likely be considered a weak move, this positioning likely psyops the community
— Larry Cermak (@lawmaster) May 9, 2022
Terra Founder Do Kwon confirmed that the transaction had been sent and said the blockchain was planning to “redeem this whole clip in bitcoin eventually.”
I haven’t sold bitcoin yet – txn just came out. This is a loan to a market maker – if a UST imbalance occurs we will use BTC to rebalance, and if there is excess demand we will buy BTC
We plan to eventually trade this whole clip to bitcoin, let’s see