Luna Foundation Guard just added $100m AVAX to their Stablecoin Reserve alongside with BTC!
The Luna Foundation Guard (LFG), a Singapore-based nonprofit organization built to support the Terra Blockchain is dedicated to economic sovereignty, security, and open-source software that helps build a truly decentralized economy.
They made an announcement yesterday, stating that they procured $100M $AVAX tokens to be added into their Stablecoin Reserve. This will have additional backing to support the $UST peg by diversifying into their non correlated assets pool.
But how does $BTC and now $AVAX support the $UST peg?
Jump Capital proposed the Reserve Model, where LFG can deploy its $BTC reserve to defend the $UST peg, thus for the rapid buying of $BTC by Stable Kwon, the founding member and director of LFG.
To date, LFG has bought 1,563,913,928.42 USD worth of $BTC, a staggering 35,767 Bitcoins.
But how can this reserve support the $UST peg when $UST supply exceeds its demand?
We know that for every mint of 1 $UST requires burning $1 worth of $LUNA Vice verse, simple supply and demand.
Hypothetically if $UST falls below peg, retail can provide 1 $UST in exchange for $0.98 in $BTC from the reserve pool.
With that said, retail can purchase $BTC from the reserve at a discount, only if $UST trades below $0.98!
But what happens when $UST trades back to peg?
Participants will be incentives to sell their $BTC at a premium for $UST. This model is so simple yet required some big brain energy!
Out of all the L1s, why $AVAX?
LFG chose $AVAX due to their rapid growing eco-system and vast fan base.
From their massive incentive program for the multiverse to the integration of $sAVAX into Anchor Protocol, I don’t see why Stable Kwon wouldn’t choose $AVAX.
I believe LFG will start adding more L1s into their Stablecoin Reserve, somewhat like an ETF to diversify risk.
For more info on $AVAX checkout my thread below:
“ In particular, Avalanche’s subnets are a powerful method for building the next generation of scalable Web3 applications within niche use cases.”
With that said, the Terra foundation teased us that they’ll be collaborating with $AVAX on a new gaming subnet!
But why not $ETH?
I believe $AVAX has a much stronger community compared to the behemoth $ETH. Especially with the recent $AVAX incentive that brought $UST to $AVAX, it just makes sense.
But what about ETH2.0 and the merge???
Checkout my thread below on the following:
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