In short
Terra-linked nonprofit The Lunar Foundation Guard claims to have raised $1 billion through a private token sale.
It states that the money will be used to fund an “UST Forex Reserve in Bitcoin.”
UST is a stablecoin which uses Terra’s LUNA for its peg.
Crypto has seen a lot more money recently with funding rounds of $100 million and above becoming quite common. A recent token sale over-the-counter has elevated it to a new level.
Terra and the Luna Foundation Guard ( ), a non-profit organization that supports Terra, announced today a $1 billion token sales of LUNA by Three Arrows Capital, headed by Su Zhu –and Jump Crypto – the same trading group that made Solana crosschain bridge Wormhole whole following a $320million hack.
Decrypt did not receive any response to Decrypt ‘s inquiries about the details of the raise. This included whether funds were raised in Bitcoin. Depending on the date of the raise, the raise’s value could have been less than $1 million due to the market downturn.
LFG will use the funds for what it calls a UST Forex Reserve. Understanding the Terra ecosystem is key to understanding why. It includes the native LUNA token as well as fiat-based stablecoins.
TerraUSD (UST), is not backed by greenbacks, but is instead tied to LUNA. Whenever someone mints UST they must also burn LUNA. To keep the price stable, a whole tokenomic structure was created. Users can buy UST at a discounted price and then trade it for $1 of LUNA. Arbitrage plays allow the UST to be burned and help bring the stablecoin’s value back to normal.
Stablecoins that are not backed by fiat can lose their peg if the algorithms don’t match up with traders’ short-term needs, as was the case with Iron Finance last July.
“One of the criticisms of algorithmic stabilitycoins is that they can become reflexive during extreme volatility where arbitrage incentives to bring it back to parity could potentially deteriorate,” LFG stated in a press release. The UST Forex Reserve is an additional way to preserve the stability of the peg during contractionary cycles, which reduces the reflexivity.
LFG describes the reserve as a Bitcoin-based reserve that diversifies the ecosystem from Terra assets. It also provides “a release valve” for the redemption of UST into LUNA. LFG claims it can access Bitcoin reserves to stabilize market conditions in the event of a sell-off. The LFG also stated that it will add other “major non-correlated assets to the reserve” in the future.
Jump Crypto, Three Arrows and other buyers in the $1Billion sale will be subject to a four year vesting period for LUNA tokens. This means that they cannot all be sold on the open market immediately. The vesting schedule has not been disclosed.
Terra creator Do Kwon founded the Luna Foundation Guard along with Terraform Labs head for research Nicholas Platias. Jump Crypto president Kanav Kariya, Remi Tetot (real vision co-founder), Jonathan Caras (Levana Protocol communication lead) and Jose Maria Macedo (Delphi Labs leader) make up the governing council.
