Luna Foundation Loans Out BTC to Defend Bitcoin Peg, Faces Community Backlash
The Luna Foundation Guard (LFG), the entity tasked with holding bitcoin (BTC) as part of the reserves backing the TerraUSD (UST) stablecoin, has loaned out USD 750m worth of BTC to a trading firm “to help protect the UST peg.” Confronted with what this really means, Terra (LUNA) founder Do Kwon claimed that the LFG is not seeking to exit its BTC position.
According to a series of tweets from the LFG, the move to loan out BTC was necessary in order to protect the stablecoin’s peg in the face of increased volatility in crypto markets – and a temporary drop in the price of UST – over the weekend.
“Per the LFG’s mandate, the LFG will proactively defend the stability of the UST peg & broader Terra economy, especially under volatility and the uncertainty of macro conditions in legacy markets,” LFG said in a Twitter thread posted on Monday, adding that crypto market volatility recently has been “significant.”
Further, the thread added that the LFG Council – in order to deal with the situation – has voted to:
As of Monday at 11:24 UTC, BTC has fallen by 5.4% over the past 24 hours, while Terra’s native token LUNA has fallen by 5.3% over the same time period. Over the past 7 days, the two coins are down by 15% and 27%, respectively.
Meanwhile, the price of UST dipped as low as 0.986 against tether (USDT) on Binance on Saturday, before trimming losses. As of press time, UST remained below its peg, trading at USDT 0.995 on the exchange.
Perhaps not surprisingly, the LFG’s communication on the issue led to discussions in the community on Twitter, with some criticizing the foundation for what they described as “not very clear” communication.
“Has BTC been sold,” and in that case, “how much,” asked Twitter user Tundra who described himself
Read more on cryptonews.com
