What happened to the bitcoin reserve behind Terra’s UST stablecoin?

Bitcoin has fallen below the $ 26,000 level since December 2020. (Photo credit is expected to be CFOTO / Future Publishing via Getty Images)

CFOTO | Future publication via Getty Images

Investors have been eager to find out what has happened to more than 3 billion dollars in bitcoin bought by cryptocurrency firm Terra to support its failed stablecoin. Now they have their answer.

Luna Foundation Guard, a fund created by the creator of Terra Do Kwon, said Monday spent nearly all of the bitcoin in its reserve last week in a futile attempt to save landUSD – or UST, for short.

The foundation had amassed a total of over 80,000 bitcoins, which it was worth over $ 3 billion last week. Kwon had promised to use bitcoin in the event of a drastic drop in UST’s value.

In a series of tweets, Luna Foundation Guard claimed to have transferred 52,189 bitcoins to “trade with a counterparty” as UST fell below its expected $ 1 anchor. Another 33,206 bitcoins were sold directly from Earth in the last. desperate attempt to defend the peg, the foundation said.

As of Monday, Luna Foundation Guard only had 313 bitcoins left in its reserve, worth approximately $ 9.3 million. The company said it will use the rest of its assets – which include other digital tokens, such as BNB and avalanche – to “compensate for remaining users” of UST.

“We are still discussing various distribution methods, updates to follow soon,” said Luna Foundation Guard.

UST is what is known as an “algorithmic” stablecoin. Unlike tether and USDC, which hold fiat assets in a reserve to support their tokens, UST has relied on a complex mix of codes, combined with a floating token called the moon, to balance supply and demand and stabilize the price.

When UST began dipping below $ 1 last week, luna started selling too, causing a vicious cycle that plunged UST to less than 30 as luna became useless. UST is now only worth 9 cents, according to data from CoinGecko.

The collapse of the Earth tokens Rippled through the cryptocurrency marketswiping out over $ 200 billion in wealth in a single day. Bitcoin Bitcoin briefly plunged below $ 26,000 on Thursday, its lowest level since December 2020.