The Technology Express Magazine | Edition: June 2022

CRYPTOCURRENCY
TERRAUSD CRASH COST THE FOUNDATION
BEHIND IT BILLIONS WORTH OF BITCOIN
Singapore-based Luna
Foundation Guard (LFG)
said it spent billions of
dollars’ worth of Bitcoin
and other cryptocurrencies
last week in its unsuccessful attempt
to uphold the peg of collapsed
stablecoin TerraUSD (UST).
LFG, the association formed to
defend and support the decentralised
token and Terra blockchain, said its
Bitcoin reserves dropped from more
than 80,390 to only 313 in less than 10
days.
LFG, which was set up by Terra
creator Do Kwon, had collected more
than 80,000 Bitcoins that were worth
over $3 billion last week.
“Consistent with its non-profit
mission and focus on the health
of the Terra ecosystem, beginning
on May 8, when the price of $UST
began to drop substantially below
one dollar, the foundation began
converting this reserve to $UST,” LFG
said in a statement on Twitter.
“The foundation did so by directly
executing on-chain swaps and
transferring $BTC [Bitcoin] to a
counterparty to enable them to enter
trades with the foundation in large
size & on short notice.”
The last week’s collapse of the
UST stablecoin sparked a panic in the
crypto market.
The UST stablecoin — which is
usually expected to be worth $1 —
dropped below $0.20. Meanwhile,
the Luna token that is intended
to serve as a shock absorber for
UST’s algorithmic dollar-pegging
mechanism, plummeted to $0.002
from $80.
Terraform Labs — the company
behind blockchain technology that
runs the UST and Luna coins — twice
stopped processing new transactions
to calm the market fluctuations. Both
the UST and the associated Luna
tokens were trading near zero at the
time of the second halt.
Stablecoins, which are pegged
to the value of traditional assets
such as the US dollar, are usually
popular in times of turmoil. They are
key elements of the cryptocurrency
market and traders park funds in
these assets as they move in and out
of other digital tokens.
LFG said it would disburse its
remaining assets to compensate
users of the stablecoin, starting with
the smallest holders. However, it did
not disclose the future plans.
“We are still debating through
various distribution methods, updates
to follow soon,” LFG said.
The world’s biggest stablecoin,
Tether, also briefly lost its 1:1 peg
but recovered shortly. On the
same day, Bitcoin — the world’s
largest cryptocurrency — dropped
to $25,400, its lowest level since
December 2020.
Bitcoin was trading 5.3 per cent
down at $29,630.6 a coin on Monday.
Ether, the second-biggest crypto, was
almost 6 percent down at $2,016.2 a
coin.
www.thetechnologyexpress.com JUNE 2022 / 21