Terra adds US$135m in Bitcoin purchases to back stablecoin

[NEW YORK] Do Kwon, the co-founder and chief executive officer of the firm behind the Terra blockchain, confirmed that it has purchased more than US$1 billion in Bitcoin since the end of January.

That includes about US$135 million in 4 purchases Monday (Mar 28). Kwon confirmed with Bloomberg News the Bitcoin address used by the Singapore-based Luna Foundation Guard (LFG) to buy the cryptocurrency. Data show that the address has bought a total of 27,784.96954740 Bitcoin.

Bitcoin erased its losses for the year over the weekend and was trading at around US$47,570 during New York hours Monday. Earlier this month, Kwon announced its UST stablecoin would be backed by a reserve of Bitcoin that could eventually reach US$10 billion. He tweeted on Mar 22 that he has US$3 billion in funds ready to make purchases to back the algorithm stablecoin.

The Bitcoin address shows that LFG first started buying on Jan 26. The biggest purchase occurred on the same day with more than 8,588 Bitcoin.

Terra's purchases are partly in response to criticism around UST. The stablecoin is not backed by a fiat currency like centralised stablecoins such as Tether. It has been able to maintain its peg to the dollar by issuing and destroying Luna tokens, Terra's native cryptocurrency. For every new UST created, US$1 worth of Luna is burned on the Terra blockchain.

A Bitcoin reserve for UST will help improve UST's ability to keep its dollar peg, especially when Terra faces a short-term demand in redemption of UST, according to Kwon.

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"The reason why we are particularly interested in Bitcoin is because we believe that is the strongest digital reserve asset," Kwon said in an interview with Bloomberg previously this month. "UST is going to be the first Internet native currency that implements the Bitcoin standard as part of its monetary policy." BLOOMBERG