LUNA, the governance token behind the Terra network, is leading the charge in today’s crypto market. It spiked more than 10% earlier today to reach a new record high of $106.14, according to CoinMarketCap.
The price of LUNA has slightly backtracked since then; however, it is still up roughly 9% over the day, trading around $103.48 at press time.
LUNA has a market cap of $36.8 billion and is currently ranked eighth largest among all cryptocurrencies. It is one of the Terra network’s native tokens, which also lists a selection of decentralized stablecoins.
TerraUSD (UST), which boasts a market cap of $16.2 billion, is the most popular of them and is also the largest decentralized stablecoin ranking ahead of MakerDAO’s DAI.
LUNA’s latest price action most likely relates to the news that Luna Foundation Guard (LFG), a Singapore-based non-profit organization supporting the Terra network, recently purchased $135 million worth of Bitcoin to back the UST stablecoin.
Terra’s Bitcoin reserve
As reported by Bloomberg, the purchase on Monday came in four batches, with Do Kwon, the CEO of LFG and founder and CEO of Terraform Labs, confirming that the firm had bought more than $1 billion in Bitcoin since the end of January.
At the time of writing, LFG’s Bitcoin address holds 27784.9 BTC or roughly $1.32 billion at current prices.
Unlike centralized stablecoins like Tether (USDT), TerraUSD isn’t backed by greenbacks. It’s instead tied to LUNA, which means that whenever someone mints UST, they must also burn LUNA.
However, according to Kwon, a Bitcoin reserve will help improve UST’s ability to keep its dollar peg, LFG is keen.
“The reason why we are particularly interested in Bitcoin is because we believe that [it] is the strongest digital reserve asset,” Kwon told Bloomberg earlier this month. “UST is going to be the first internet native currency that implements the Bitcoin standard as part of its monetary policy.”
Last month, LFG said it raised $1 billion in a private token sale of LUNA, with the funds reportedly to be used for TerraUSD’s reserve denominated in Bitcoin.
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