Why Luna Foundation Guard Bitcoin purchases for UST reserves could be key to digital asset becoming a reserve currency

  • Terra continues to follow Do Kwon’s plan and purchases bitcoins to provide reserves of Terra’s own stablecoin
  • Could this eventually lead to bitcoin becoming the official reserve currency?

Terra’s promise to accumulate $10 billion worth of Bitcoin is pushing the market forward. For some in the community, this can be seen as part of a movement to recognize bitcoin as the reserve currency of our time.

Terra continues to provide reserves for its UST stablecoin

The Luna Foundation Guard (LFG), which secures the TerraUSD algorithmic stablecoin, added $173 million worth of Bitcoins over the past weekend.

This was confirmed by Bitcoin advocate Anthony Pompliano, co-founder of venture capital firm Morgan Creek Digital.

As of press, LFG currently holds 39,89 thousand BTC worth about $1.67 billion. The average buying price of the digital asset is about $42,600, according to Blockchain Observer.

Bitcoin accumulation comes after Do Kwon, the founder of blockchain company Terraform Labs revealed the firm’s plans to buy $10 billion worth of Bitcoins (BTC) to ensure the stability of the Terra USD (UST) stabelcoin, he stated: “$UST with $10B+ in $BTC reserves will open a new monetary era of the Bitcoin standard. P2P electronic cash that is easier to spend and more attractive to hold.”

Read more: Terra founder Do Kwon plans to obtain $10B BTC for reserves

In theory, bitcoin reserves add another level of certainty, while maintaining the decentralized nature of the Terra project.

“Backing it up with something as predictable – not in terms of price, but in terms of rules and governance – as bitcoin, brings a lot of confidence to people,” said Matthew Siegel, head of digital asset research at VanEck in New York.

He said he expects other algorithmic stack coins to follow Terra’s example and back up their coins with Bitcoin reserves and even other cryptocurrency tokens if the experiment proves successful. Terra’s use of Bitcoin to create a reserve could push the BTC to become a major reserve currency. The question remains, will other companies follow suit?

Related: Terra founder Do Kwon: I want to be the second biggest Bitcoin owner after Satoshi

Bitcoin may become the main reserve currency

Undoubtedly, the unrestrained monetary emission by the central banks of the United States and the European Union and, as a result, excess liquidity was one of the reasons for the current rise in the value of cryptocurrencies. However, the same is true for traditional assets.

But the main reason for Bitcoin’s rise in value is different. One by one, institutional investors began to recognize Bitcoin as a real asset and began to invest in it, and that was the main driver of the explosive growth in its price:

  • Terra buys Bitcoin to secure UST stablecoin.
  • More and more banks and funds introduce BTC-related products.
  • Bitcoin became the official currency of El Salvador.

Bitcoin is no longer an investment for fringe investors. The flow of institutional investors into crypto-assets will only increase. But that doesn’t mean at all that BTC prices will go up all the time. Given the sensitivity of the price to news flow, we will continue to witness serious corrections.

Related: Could extraordinarily elevated inflation numbers lead to a crypto market carnage this June?

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