Terra says it raised $1B in a private LUNA token sale

Three Arrows Capital and Jump Crypto have led a $1 billion token sale of LUNA tokens. The over-the-counter token sale was announced by Terra and the Luna Foundation Guard (LFG). This comes as voluminous capital continues to pour into crypto despite the ongoing recession.

The LFG is an organization created by the co-founder of Terra, Do Kwon and the head of research at Terraform Labs, Nicholas Platias. LFG has a governing council comprised of the president of Jump Crypto, Kanav Kariya, the co-founder of Real Vision, Remi Tetot, the communication lead at Levana Protocol, Jonathan Caras and the leader at Delphi Labs, Jose Maria Macedo.

A UST Forex Reserve

The Luna foundation will use the raised funds to create the UST Forex Reserve. UST is a stablecoin on the terra ecosystem whose value is not pegged to fiat currency but the value of LUNA tokens. To mint UST, LUNA tokens are burned to maintain price stability.

However, stablecoins whose values are not pegged to fiat currencies suffer from price instability when the tokenomics fail to adjust according to the short-term needs of traders. Algorithmic stablecoins tend to react during extreme market volatility periods, making them less preferred to fiat-backed stablecoins such as USDT and USDC.

In a press release, LFG said,

The UST Forex Reserve provides an additional avenue to maintain the stability of the peg in contractionary cycles that reduces the reflexivity of the system.

Reserve denominated in Bitcoin

The UST Forex Reserve will be denominated in Bitcoin (BTC/USD). It will allow the Terra ecosystem to diversify and transition towards “a release valve for the redemptions of UST” into LUNA tokens.

The foundation says that the Bitcoin reserves can stabilize the prices in cases of extreme volatility. It has also revealed plans to grow this reserve using other “major non-correlated assets.” The $1 billion token sale will be subjected to a four-year vesting period involving the LUNA tokens. This will prevent the tokens from being dumped into the market simultaneously, which could harm prices. The organization is yet to share additional details regarding the vesting schedule.

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