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IPFS News Link • Bitcoin

What Happened to the $3.5 Billion Terra Reserve? Elliptic Follows the Bitcoin

• Elliptic Blog

Holders of the LUNA token and UST stablecoin collectively lost around $42 billion over the past week. However, $85 million in cryptoassets remains in the Terra reserve to compensate them. 

Following the collapse of Terra's UST stablecoin, questions have been asked about the fate of the $3.5 billion in Bitcoin (BTC) held in reserve to help prevent exactly such an outcome. We use Elliptic's blockchain analytics tools to follow the BTC reserves as they were moved following UST's fall.

This week saw the collapse of TerraUSD (UST), the algorithmic "stablecoin" created by Terraform Labs. Intended to maintain a peg to the US dollar, the value of 1 UST plummeted from $1 to a low of just $0.04 – leading to billions of dollars in losses for UST holders.

Perhaps foreseeing the failure of the mechanism intended to maintain that peg, the Luna Foundation Guard (LFG) – a non-profit organization formed to support the growth of the Terra ecosystem – announced that it would purchase up to $10 billion in Bitcoin and other cryptoassets, to act as a reserve that would back the UST stablecoin. Between January and May this year, 80,394 BTC – worth $3.5 billion at the time – were purchased by the LFG.