Luna Foundation Guard Will Lend Out $1.5B in BTC and UST for Its Stablecoin Peg

Luna Foundation Guard (LFG), a Singaporean entity that is establishing a reserve protocol for the algorithmic stablecoin UST has announced that it will lend out $1.5 billion in bitcoin (BTC) and TerraUSD (UST) in order to defend the peg of the stablecoin to the US dollar. $750M in Bitcoin + $750M in UST In a tweet thread, LFG stated that it would loan out $750 million worth of BTC to trading firms to help protect the peg and also loan $750 million in UST to accumulate bitcoin to help normalize the market, especially under volatility and the uncertainty of macro conditions in legacy markets.’ 4/ As a result, the LFG Council has voted to execute the following: – Loan $750M worth of BTC to OTC trading firms to help protect the UST peg. – Loan 750M UST to accumulate BTC as market conditions normalize. — LFG | Luna Foundation Guard (@LFG_org) May 9, 2022 LFG further added in the thread, “The traders will trade the capital on both sides of the market to help accomplish both #1 and #2, eventually maintaining parity of the LFG Reserve pool (denominated in BTC) as market conditions progressively stabilize”. Founder Do Kwon Explains the Rationale In a separate tweet thread, Do Kwon, the project’s founder, said that the move to loan out $750 million of bitcoin shouldn’t be seen as LFG trying to exit its BTC position but rather increasing the liquidity around the UST peg. Infact, LFG will buy more BTC if UST expands from here, he added. 2...