The Luna Foundation Guard (LFG), a non-profit organization, has announced new steps to ensure the liquidity of UST, the Terra ecosystem’s flagship stablecoin, in secondary markets. The protocol has already hit its daily cap on UST issuance, but demand is high enough that the foundation will need to burn additional LUNA to ensure UST supply in these marketplaces.
Luna Foundation Guard to Burn 4.2 Million LUNA for UST
The Luna Foundation Guard, a non-profit group dedicated to assisting Terra ecosystem projects, has taken action to improve the supply of UST on secondary markets. The most prevalent method of earning UST, the Terra ecosystem’s dollar-pegged stablecoin, is to burn LUNA in the protocol treasury. However, as demand for UST grows, the maximum daily supply of the stablecoin is reached, leaving a large number of investors without access to the currency.
These investors are therefore forced to seek liquidity in secondary markets such as exchanges and decentralized finance applications. As such, the Luna Foundation Guard council resolved to burn 4.2 million LUNA to UST and sell it to markets such as Curve, whose stablecoin pools have been losing balance due to high demand.
This is the second time this month that the organization has chosen to intervene to restore balance to Curve pools. Recently, the foundation took a same stance, declaring their intention to burn 5 million LUNA to issue UST to address these inequalities.
The proceeds from that operation were used to purchase bitcoin for the treasury, and the Luna Foundation Guard has also opted to spend cash from this recent operation to purchase additional bitcoin for the FX reserve used to sustain the price of UST during times of market stress.
A big part of Terra’s appeal to investors appears to be Anchor, a mechanism that allows users to earn over 20% interest on their UST deposits. Anchor has accumulated about ten million UST in deposits at the time of writing. LUNA, the Terra protocol’s stabilizing partner token, has also profited from this step. LUNA is now worth about $100, a gain of more than 50% in the previous 30 days, according to Coingecko data.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.