The public blockchain Terra, which caught the attention of the cryptocurrency world by promising to buy $10 billion worth of Bitcoin to create a reserve for the UST stablecoin, is diversifying this strategy.
Bitcoin whale Terra diversifies its strategy with Avalanche
Luna Foundation Guard, a Singapore-based nonprofit built to support Terra, has received $100 million from the Avalanche Foundation to increase its stablecoin reserve. worth of Avalanche (AVAX). The purchase will make the token the second asset in UST’s reserve, after Bitcoin (BTC).
Terra’s UST stablecoin is already backed by a Bitcoin reserve that could eventually reach $10 billion. The firm has invested more than $1 billion since the end of January, adding another $230 million to Bitcoin on Wednesday. Terra is accelerating Bitcoin uptake to help improve UST’s ability to stay tied to the dollar. Although the algorithmic stablecoin is not backed by the fiat currency, it has managed to maintain the dollar stable by issuing and destroying Terra’s native cryptocurrency LUNA tokens.
What does Terra aim with this move?
Terraform Labs founder Do Kwon states in an interview that Luna Foundation Guard chose Avalanche among other cryptocurrencies for its UST reserve due to its rapid growth and large fan base. According to CoinGecko data, Avalanche is the tenth largest cryptocurrency by market capitalization, while LUNA ranks seventh. Both Avalanche and Terra are layer-1 blockchains similar to Ethereum, where users can code and create projects ranging from Non Fungible Tokens to decentralized finance applications (DeFi). Do Kwon says:
Avalanche is still a growing ecosystem. Users feel too close to an entity that aligns them with AVAX. Whereas, for the average Ethereum user, comparing yourself to Ethereum is not that important.
Do Kwon notes that Bitcoin will continue to be the ‘main support’ of the UST stablecoin, while the deal with Avalanche has bought a lot of user familiarity from Avalanche for UST and Terra.
Strategic partnership with Luna Foundation Guard will allow Avalanche users to exchange UST for Avalanche tokens directly on the latter’s Blockchain. The Avalanche reserve will also live on Avalanche, unlike the Bitcoin reserve on Terra Blockchain. As we have also reported as Kriptokoin.com, several apps on Terra Blockchain will launch a release on Avalanche.
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