Recently, a lot of money has been pouring into crypto, with $100 million+ fundraising rounds becoming routine. However, a recent over-the-counter token sale has elevated it to new heights.
Terra and the Luna Foundation Guard (LFG), a nonprofit organization dedicated to supporting the Terra network, announced today a $1 billion LUNA token sale led by Three Arrows Capital, which is led by Su Zhu, an occasional Ethereum critic, and Jump Crypto, the same trading group that made Solana cross-chain bridge Wormhole whole after a $320 million hack.
The organization did not answer questions from a website regarding the specifics of the fund-raising, such as whether the monies were raised entirely in Bitcoin. Depending on when the rise occurred, the value of the raise could be less than $1 billion due to the market slump.
LFG plans to use the cash to establish a UST Forex Reserve. To understand why, you must first grasp the Terra ecosystem, which contains the native LUNA token as well as fiat-based stablecoins.
The TerraUSD (UST) is backed by LUNA rather than greenbacks. When minting UST, one must also burn LUNA. The entire tokenomic structure is built to keep the price constant. Users can buy UST at a discount and sell it for $1 of LUNA if the price of UST falls below $1. Because of the arbitrage play, the UST is burned, allowing the stablecoin’s price to return to normal.
However, non-fiat stablecoins have previously lost their peg when the algorithms failed to satisfy the short-term needs of traders, as was arguably the case with Iron Finance in June.
The reserve, which is denominated in Bitcoin, diversifies the ecosystem away from Terra assets and acts as a “release valve for UST redemptions” into LUNA, according to LFG. In the event of a sell-off, LFG claims it can tap into its Bitcoin reserves to help stabilize the market. It also states that other “important non-correlated assets” will be added to the reserve in the future.
The LUNA tokens will be subject to a four-year vesting period for Jump Crypto, Three Arrows, and other buyers in the $1 billion sales, according to the company, which means they can’t all be dumped on the open market right away. More information on the vesting timeline has yet to be released.
