Amid the ongoing massive crypto market volatility, nonprofit organization Luna Foundation Guard or LFG has announced that it is accelerating its goal to support blockchain innovators by offering a loan worth $1.5 billion for protecting its stablecoin peg.
LFG brings loan worth $1.5B to maintain UST stability
The LFG said this Monday that it will lend out $750 million worth of Bitcoin (BTC) to Over-the-counter (OTC) trading firms to protect the UST peg and 750 million UST from accumulating BTC as market conditions normalize.
As market conditions improve, traders will exchange money on both sides of the market to assist in accomplishing both offerings, finally maintaining parity of the LFG Reserve pool (denominated in BTC).
Notably, the algorithmic stablecoin tied to Terra crypto ecosystem, UST, recently experienced notable directional flow over the weekend, going below its expected $1 position, accompanied by similar volatility in both LUNA and BTC. However, it soon recovered from the sudden slip and is currently trading at $0.996 at the time of publication.
Via a Twitter thread, LFG said it is “prudent to prepare for potential future volatility.” The organization added that it will “proactively defend the stability of the $UST peg & broader Terra economy, especially under volatility and the uncertainty of macro conditions in legacy markets.”
Building a solid stablecoin reserve
In February, LFG raised $1 billion to create a Bitcoin-based reserve that would act as a backstop for UST’s peg. The organization’s stablecoin dethroned the Binance USD (BUSD) to become the third-largest stablecoin as a result of its constant efforts.
The Luna Foundation is noted for its Bitcoin bullishness. It spent $1.5 billion last week to buy 37,863 BTC. As of earlier this week, LFG has more than $3 billion in bitcoin in its reserve, putting it on track to gather $10 billion in stablecoin reserves by the end of Q3 2022.