Terra (LUNA) Community Burns 4 Million LUNA Tokens To Build TerraUSD (UST) Reserves

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The Luna Foundation Guard (LFG), a blockchain community centered around the Terra network, said it had burnt 4 million LUNA tokens to mint about 372 million of the stablecoin TerraUSD (UST).  The UST proceeds will go towards acquiring more collateral to bolster the foundation’s non-LUNA reserves.

The move comes as growing volatility in the market pushed more traders into UST. Rising UST demand threatens to unsettle the token’s 1:1 peg against the U.S. dollar, which has seen the community burn LUNA to mint UST and meet growing demand. $1 worth of LUNA can be burnt to mint 1 UST.

The Terra community has been building reserves to bolster UST’s credibility. Last month, the LFG said it had raised $1 billion in Bitcoin as a reserve for UST.

With today’s burn, the LFG said its total non-LUNA reserves will sit at $2.2 billion. It also holds 8 million LUNA tokens. The reserves act as a stopgap against volatility, allowing the LFG to maintain the UST peg despite large amounts of buying or selling pressure.

LUNA price benefits as a result

The token’s price has skyrocketed in recent months given its use in minting UST. The steady burn rate of LUNA has also curbed supply,  further supporting its price. Data from Terra Analytics shows about 27 million tokens have been burnt over the past month, bringing total circulating supply down to 371 million.

LUNA’s performance over the past month has vastly outpaced the broader crypto market. It is currently up 75% in the past 30 days, and is trading at about $92, just below a record high. By comparison, total crypto market value has  sunk by 15% to $1.71 trillion in the past month.

UST demand has also been bolstered by the growing popularity of the Anchor Protocol (ANC), a DeFi money market program built on the Terra network. The protocol gives UST depositors a nearly 20% yield, which is well above anything offered by other major stablecoins.

With more than five years of experience covering global financial markets, Ambar intends to leverage this knowledge towards the rapidly expanding world of crypto and DeFi. His interest lies chiefly in finding how geopolitical developments can impact crypto markets, and what that could mean for your bitcoin holdings. When he isn't trawling through the web for the latest breaking news, you can find him playing videogames or watching Seinfeld reruns. You can reach him at [email protected]
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.

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