Terra founder plans to back his stablecoin with a ‘basket’ of cryptocurrencies – Marketingwithanoy

In addition to bitcoin, supporting stablecoins with other cryptocurrencies could help expand the digital ecosystem

There have been Many headlines in recent weeks revolved around the picks of Do Kwon, the founder of Terraform Labs, who created the crypto tokens LUNA and stablecoin TerraUSD (UST).

Kwon previously announced plans to obtain $10 billion in bitcoin for reserves to “open a new monetary era of the Bitcoin standard.” The money will be used to support UST in a decentralized foreign exchange reserve to keep the stablecoin’s value at a fixed rate.

On Wednesday, a few hours before speaking to Marketingwithanoy, he casually said: tweeted that he bought 230 million dollars in bitcoin.

Kwon told Marketingwithanoy Terra has bought $1.6 billion worth of bitcoin so far and plans to buy another $1.4 billion with capital from Luna Foundation Guard. The Terra protocol will buy the remaining $7 billion in bitcoin through users who want to mint UST. “Users would put bitcoin in reserve and then get UST,” he explained.

But what’s more interesting is that these bitcoin purchases are just the beginning of Kwon and Terra’s larger roadmap to expand and integrate the stablecoin deeper into the crypto ecosystem.

Kwon plans to support UST in the near future with other Layer 1 (L1) blockchains such as Solana and Avalanche, to name a few.

“We are big proponents of Bitcoin, so we just keep buying when the opportunity arises,” Kwon said. “Over time, Terra will be supported by a basket of top tier 1 assets.”

He didn’t clearly note what L1s that would bring, but he said bitcoin will remain the dominant reserve for UST. “I don’t think we’re going to cover all ecosystems in the coming weeks, but we’ll put reserves on some of the popular ones,” Kwon said.

There is a circulating supply of UST 16.72 billion in the market and the current volume of the stablecoin is $672 million, up 9.2% in the last 24 hours, according to data on CoinMarketCap at the time of publication. UST is the 14th largest cryptocurrency by market capitalization.

As the Terra ecosystem begins to grow significantly within other L1s, such as the Avalanche blockchain, there is a possibility that UST will be supported by many Avalanche token, AVAX, he said.

“If you coin UST on Avalanche, you would trade AVAX instead of bitcoin and that in turn will improve the size of AVAX reserves,” he said.

By adding other types of collateral, it will expand the potential user base of Terra stablecoins, he said. “For example, if Terra stablecoins are SOL’s largest consumer. would be, [Solana] whether AVAX and the reserves are that large, then there is an inherent alignment with the user base of each of those ecosystems.”

While the “share of the pie” that Luna takes home is shrinking, the approachable market will grow significantly, he said.

Stablecoin’s growth is anything but stable

Stablecoins get their name from the fact that they are “stable” due to a 1:1 ratio that pegs their value to an external reserve, usually US dollars, but can also be pegged to other assets, such as UST with bitcoin. This means that every stablecoin in circulation is backed by $1 in its relative reserve, be it US dollars or another asset.

The stablecoin ecosystem has expanded dramatically in the past year, and even the US Federal Reserve took note by saying in a January 2022 report on crypto assets that they have “endured tremendous growth over the past year” and that “ stablecoins have the potential to support next-generation innovations.”

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