Weeks after the Luna Foundation Guard (LFG) aired its plans to purchase USD1 billion in Bitcoin, it has now taken it a step further. Do Kwon, Terra co-founder, wants to acquire USD10 billion in bitcoin. The Foundation’s initial plan was to use the bitcoin to restore peg parity between its TerraUSD (UST) and the US dollar.
The LFG had earlier said that the UST’s peg, as an algorithmic stablecoin, is maintained by a series of the open market, arbitrage incentives, and countercyclical levers. These offset market forces push the UST peg above or below one US dollar. LFG highlighted that Terra’s reserve, staking and governance asset preserves an elastic supply. It helps neutralize directional market pressures hitting the peg.
Terra wants to use bitcoin to restore UST’s peg parity to the US dollar when there are protracted market sell-offs. Do Kwon tweeted that they need to buy big coin around $3 billion worth. But Terra hasn’t bought most of it. The founder described LFG’s plans as “a new monetary era of the Bitcoin standard”. He said P2P electronic cash is easier to spend and more attractive to hold.
When questioned about the USD 10 billion, Do Kwon pointed out that UST money supply is growing. A portion of the seigniorage will be used to build BTC reserves bridged to the Terra chain. He added that they have 3B funds ready to seed the reserves. However, the technical infrastructure is still not ready.
Analysts say that it seems Do Kwon is ready to continue with his plans to back a new US dollar stablecoin with both BTC and LUNA. This may push up the bitcoin price a notch.