Luna Foundation Guard seeks to raise $1 billion from investors as the value of a dollar pegged stablecoin plummets by nearly half amid broader market turmoil. According to reports, the cash injection will help restore the UST’s dollar peg.
Luna Foundation Guard Moves To Defend UST
Earlier, the Luna Foundation Guard series of actions It aims to defend the Terra economy and the UST dollar peg, including lending $750 million worth of BTC to over-the-counter companies.
There has also been a significant move of BTC from wallets related to the Luna Foundation Guard, sparking intense speculation about the final destination of the transfer.
Luna Foundation Guard is currently attempting to raise $1 billion to support the UST stablecoin whose value continues to collapse. Algorithmic stablecoins like the UST should be kept one-to-one with the price of the underlying fiat currency, in this case the dollar. However, the stablecoin fell to $0.61 on Monday and recovered to $0.91 on Monday thanks to the market’s widespread sell-off. However, this recovery alone was not enough to restore parity with the dollar.
According to reports, Celsius, Jump, Jane Street, and Alameda are in talks to purchase Terra’s token, LUNA, at a 50% discount. The tokens will then be locked up for one year and vest monthly in the second year. The company in question did not respond to speculation, nor did Luna Foundation Guard. Earlier, founder Kwon Doo of Terra warned investors through Twitter that the announcement of the UST recovery package was imminent.
UST Under Fire
The funding effort is a recent attempt by the Luna Foundation Guard, hoping to return some confidence to the market. Earlier, the foundation announced that it had lent $1.5 billion in UST and Bitcoin to third-party trading companies. Initially, the foundation planned to purchase nearly $10 billion in Bitcoin to support the pinning of stablecoins.
UST has been increasingly criticized for attempting to maintain parity with the dollar through its relationship with the LUNA token. The price is maintained through a burn mechanism and the ability to sell LUNA worth $1 for 1 UST. Critics have noted that the work will depend on Anchor, a DeFi platform that generates returns of up to 20% to encourage LUNA’s price and liquidity. However, Anchor saw a significant drop in deposits from $14 billion to $10 billion.
Typically, Arbitrageurs intervene when there is a price change, convert $LUNA $100 into UST $100, and profit from the price difference. However, the recent unprecedented withdrawal of UST across decentralized financial protocols has put considerable pressure on the system.
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