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Terra’s LFG to lend OTC traders $1.5B in BTC, UST to support stablecoin peg

Ponzi Scheme

Terra’s LFG to lend OTC traders $1.5B in BTC, UST to support stablecoin peg

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Luna Foundation Guard (LFG) said on May 9 that it will lend out $1.5 billion worth of Bitcoin (BTC) and UST to defend the algorithmic stablecoin’s peg to the U.S. dollar.

Terra’s UST suffered a coordinated attack on May 8, which led to de-pegging from its $1 mark to below $0.992. 

While the de-pegging lasted for only a brief moment, it was enough to spread massive FUD about the Terra ecosystem and renewed calls of it being a “Ponzi scheme.”

However, in a move designed to protect the algorithmic stablecoin from a future reoccurrence of this kind of event, the Luna Foundation revealed that it would be working to “proactively defend the stability of the $UST peg and broader Terra economy.”

LFG is not selling BTC holdings

LFG said it will loan $750 million in BTC and another $750 million in UST to over-the-counter trading firms to protect the stablecoin’s peg to the dollar. The UST loan is designed to accumulate more BTC to stabilize the market.

The foundation was established in January as a non-profit for the Terra ecosystem. It has bought over $1 billion worth of BTC over the past few months with plans to use the flagship digital asset as a reserve for UST.

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