Luna Foundation Guard says it will lend out $1.5 billion in BTC and UST to defend stablecoin peg

The Luna Foundation Guard (LFG) said Monday that it will lend out hundreds of millions of dollars worth of bitcoin and the stablecoin UST in order to defend the latter’s peg amid a period of market volatility.

As reported Sunday by The Block, UST — the algorithmic stablecoin tied to the Terra crypto ecosystem — slipped below its intended $1 parity, though it has since recovered ground since Saturday’s low. At press time, UST is trading at $0.9955 against USDT on Binance.

In a tweet thread, LFG said that it would “will proactively defend the stability of the $UST peg & broader Terra economy, especially under volatility and the uncertainty of macro conditions in legacy markets.”

The group went on to say:

“The traders will trade the capital on both sides of the market to help accomplish both #1 and #2, eventually maintaining parity of the LFG Reserve pool (denominated in BTC) as market conditions progressively stabilize,” the thread went on to explain. 

LFG’s governing council includes Terraform Labs co-founder Do Kwon, Terraform Labs head of research Nicholas Platias and Jump Crypto president Kanav Kariya, among others. 

The Singapore-based non-profit group was formed in January to support the Terra ecosystem as well as “the sustainability and stability of Terra’s algorithmic stablecoins,” according to an announcement post at the time.

In February, The Block reported that LFG had raised $1 billion to build a bitcoin-based reserve intended to serve as a support mechanism for UST’s peg. As of earlier this week, LFG held more than $3 billion worth of bitcoin in its reserve.

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