Why Does LUNA Make Its First Purchase Of BTC Now?

Terra Co-founder Do Kwon Announces Addition of $100M Worth Bitcoin (BTC)

Terra is experiencing a bullish rally for the past few days and continues the upward momentum. It has already surpassed the performance of Cardano and Solana while capturing the 7th rank by market capitalization. The value of the native token LUNA has surged from $24 to nearly $100 within the last six months. 

Terra is a decentralized blockchain platform that specializes in the production of stablecoins. TerraUSD (UST) is an algorithmic stablecoin linked to the value of the US-dollar via the minting and burning process for LUNA. In order to make UST more stable, the establishment of Bitcoin reserves comes in to serve as a safeguard. On the other hand, Terra’s co-founder is sure that Terra will not sell LUNA tokens to build reserves but planned to obtain $10B BTC for reserves.

Do Kwon, Co-founder of Terra, has recently mentioned via Tweet that TerraUSD (UST) will be backed by $10B BTC for reserves. When asked what BTC reserves would be used for, he told Twitter followers that the fund will be used to backstop short-term UST redemptions as well as a decentralized FX reserve. 

Backing Terra’s Stablecoins (UST)

Following this, Lark Davis, a crypto-enthusiast, has posted a tweet mentioning that LUNA already purchased $125 million worth of BTC. As Kwon already mentioned obtaining $10B BTC, Terra has made its first move in purchasing BTC for $125 million.

Kwon has mentioned about the reserves twice in the last month for backing Terra’s stablecoin. And now Terra is executing things as planned while the first move is already taken. Following the tweet of Lark Davis, the followers have responded to Terra’s act of purchasing Bitcoin. Followers believe that Bitcoin’s price has surged after LUNA’s move towards obtaining BTC. 

Furthermore, Terra’s ecosystem has more information to let out for their users soon. After their first move, they will continue to build the reserves for backing TerraUSD (UST). According to Coingecko, the current market cap value of UST is $15.60 billion. Terra is surging upward in the battle for market share in the stablecoin arena, as investors appear to believe its algorithmic stabilization mechanism is long-term sustainable. The development of this Bitcoin reserve gives investors a higher margin of safety, which is always a positive thing.

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