Monday, May 20, 2024

Terra founder reveals what will happen to UST if Bitcoin price crashes

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Terraform Labs CEO Do Kwon has conceded {that a} crash within the price of Bitcoin could be “damaging” for the soundness of the UST stablecoin, however that he expects Bitcoin to go up.

Terraform Labs is the entity behind the Terra (LUNA) blockchain platform which plans on shopping for a total of $3 billion in Bitcoin as a reserve for the UST stablecoin.

Kwon made the feedback in an interview on the Unchained podcast on Mar. 29. Host Laura Shin asked Kwon what the quick time period implications of holding a lot BTC will be for the soundness of UST.

Kwon mentioned “the worst case could be if we have been shopping for Bitcoin and a crash occurs six months later, and it’s correlated with an enormous fall in demand for UST” which might be, as he modestly put it, “damaging.” Nevertheless, that situation is not conserving him up at night time:

“I’m type of betting that the long run situation of Bitcoin going up and the reserves being sturdy sufficient to face up to UST demand drops is the extra doubtless situation.”

Kwon has been shopping for Bitcoin (BTC) to maintain in Terra’s treasury as 40% of the collateral for the UST stablecoin. To date, Terra has acquired 30727.9 BTC, and most recently purchased 2,943 BTC on Mar. 29. This makes Terra the third largest single-wallet BTC holder.

Crypto YouTuber danku_r argued to his 54,000 followers in a Mar. 30 tweet that the addition of BTC to Terra’s treasury would assist mitigate the affect of a sudden retraction in UST demand. He mentioned that Terra’s transfer would assist avert a “dying spiral due to market uncertainty” by serving to the treasury “swallow the availability contraction of UST.”

One in every of Kwon’s said objectives for the treasury, often called the Luna Basis Guard (LFG) is to make Terra “the most important single-wallet holder of BTC.” So as to dethrone the present chief, Michael Saylor’s MicroStrategy, Kwon will want to amass greater than 125,051 BTC in accordance to Bitcon pockets tracker Bitcoin Treasuries.

Later within the interview, Kwon lived up to his popularity as a provocateur by proclaiming that Terra is a Layer-2 answer for the Bitcoin community. He argued that with Terra, Bitcoin has a bridge that enables it to be used “throughout a large number of functions from DAOs to NFTs to DeFi.”

“And by way of the expressivity, the transaction capabilities, the throughput, all these issues can happen on Terra.”

Associated: ‘Maintain my beer’ — Terra already up $165M from shopping for Bitcoin as BTC stash nears Tesla’s

Kwon’s remark drew the eye of the crypto group. In a tweet, Ethereum (ETH) developer antiprosynthesis responded by asking if all entities that use BTC to again a stablecoin needs to be thought of Layer-2 options. He mentioned, “Even I do not imagine that Bitcoin’s requirements have plummeted to such extent.”

A Layer-2 answer helps a Layer-1 blockchain to scale up its operations by transferring many transactions to an alternate community to cut back congestion.

BTC is buying and selling at $44,463, down 5.61% over the previous 24 hours in accordance to Cointelegraph Price Index.