Terra’s Intentions to Buy $200M Worth of AVAX Explained
After purchasing over $1 billion worth of bitcoin in weeks, Terra has turned its sights to other cryptocurrencies. Both Terraform Labs and the Luna Foundation Guard announced plans to execute in total two token swaps worth $200 million with Avalanche.
CryptoPotato reported the frequent BTC purchases from Terra, as the team wants to build up its bitcoin reserves up to $10 billion to back up its stablecoin – UST. As of now, Terra owns nearly 36,000 BTC, worth over $1.5 billion.
However, Terraform Labs also outlined a collaboration with Avalanche that will see the former complete a $100 million LUNA – AVAX token swap.
Separately, the Luna Foundation Guard (LFG), another organization supporting the Terra blockchain, said it will mimic the move. It agreed to an OTC deal worth $100 million as well to add AVAX to the UST reserve, which made Avalanche’s native cryptocurrency the “first major crypto-asset besides BTC to be added to the UST reserve.”
According to the Terra team, this will mark the beginning of a “diversified and non-correlated asset pool supporting the UST peg.”
Later on, Do Kwon – Terraform Labs’ CEO – provided more details on the collaboration with Avalanche, referring to the latter as “one of the most exciting ecosystems in web3.”
He explained that LFG’s AVAX tokens will be used to provide a reserve against UST using the automated mint mechanism identical to the one for bitcoin.
This means that UST will become AVAX native and will also be minted and redeemed against AVAX on the Avalanche blockchain.
9/ We call on every @avalancheavax project to engage with the Terra community to grow together.
Decentralized economies need decentralized money, and happy to work on blitzscaling Avalanche’s for the years to come.
🤝 @el33th4xor @kevinsekniqi @luigidemeo
— Do Kwon 🌕 (@stablekwon) April 8, 2022
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