The Luna Foundation (LFG) and Terraform Labs (TFL), which are creating reserves to support Terra's stablecoin UST, announced that they have purchased a total of $200 million worth of AVAX tokens. The foundation made half of the $200 million purchase through an OTC (over-the-counter) transaction using UST. The other half was completed by TFL in a $100 million trade from LUNA to AVAX.
“Bitcoin will continue to be the main support for the UST reserve. Also, the agreement with Avalanche will bring a lot of users from Avalanche for UST and Terra.”
Emin Gun Sirer, CEO of Avalanche developer The Ava Labs, said in a statement.
“Terra’s ability to scale its stablecoin UST was one of the reasons that attracted Avalanche to the Terra platform. I wish more coins would find ways to grow the cryptocurrency industry with deals like this partnership instead of competing for the same group of people.”
Terra has been building Bitcoin reserves to support UST for some time now. For this, approximately 35 thousand BTC purchases with a value exceeding $ 1.6 billion have been made so far. Terra's co-founder, Da Kwon, said that they would increase the purchases for this reserve up to $10 billion. In an interview in March, Kwon stated that they will become the largest institution that owns Bitcoin after Satoshi Nakamoto, the inventor of Bitcoin.
The Terra platform supports decentralized applications like Ethereum and Solana. However, the platform's token economy is different from the others. It works with algorithmic stablecoins in the LUNA Terra ecosystem. For example, whenever someone wants to mint UST, they have to burn an equal amount of LUNA. Likewise, vice versa. This means: Whenever there is a shift in the value of UST, users can buy it at this low value, but when trading it for LUNA, they can trade it at a 1:1 bond to the dollar. For example, if the UST drops to $0.9, you can buy it at $0.9 and exchange it for a LUNA for $1.
Today's development also reflected positively on the AVAX price. AVAX rose from $83 to $87 with the announcement. Meanwhile, Terra reported that they will be collaborating with Avalanche on a new game subnet, with details to be announced later.