After TerraUSD’s implosion, customers are wondering what happened to its $3 billion war fund.
TerraUSD is a “stablecoin” whose value should stay at $1. The coin’s value just decreased to 6 cents.
A charity backing TerraUSD wasted virtually all of its bitcoin holdings in two days, according to Elliptic Enterprises Ltd. TerraUSD wandered despite its large deployment.
Stablecoins made up $160 billion of the $1.3 trillion cryptocurrency market as of Monday. Nonvolatile assets don’t vary as much as bitcoin, dogecoin, etc.
Do Kwon, who invented TerraUSD, co-founded the Luna Foundation Guard to accumulate reserves as a safety net. Mr. Kwon said the corporation would acquire $10 billion in bitcoin and other digital assets this year. The gang hadn’t saved anything before the disaster.
Mr. Kwon’s Terraform Labs has donated money since January. In February, Luna, the foundation’s sister token, was offered to cryptocurrency investment businesses to raise $1 billion for bitcoin reserves.
The organization had 80,400 bitcoins worth $3.5 billion on May 7. Tether and USD Coin contributed $50 million to the company’s assets. Both stablecoins promise to be backed by redeemable dollar assets. Binance and Avalanche were also held.
Stablecoin withdrawals from the Anchor Protocol, a crypto bank where users may deposit and earn interest, lowered the interest on both assets. TerraUSD and Luna dropped below $1 as selling pressure increased.
Luna Foundation Guard began converting reserve assets into TerraUSD on May 8. Selling bitcoin and other reserves may have helped stabilize TerraUSD. Buying and selling foreign currency is similar to how central banks defend their currencies from devaluation.
The company transferred its bitcoin assets to another counterparty to enable large trades. 50,000 bitcoins were swapped for 1.5 billion TerraUSD stablecoins. They reimbursed 5,000. It sold tether and USDC for 50 million TerraUSD.
The foundation said Terraform sold 33,000 bitcoins on May 10 to retain the stablecoin’s $1 peg. 1 billion TerraUSD in compensation
Elliptic’s analysis says the group delivered funds to Gemini and Binance to complete these agreements.
Massive cryptocurrency exchanges were likely the only institutions able to handle huge trades as quickly as the foundation demanded, but traders were worried as TerraUSD and Luna plummeted. The public blockchain, the digital record that supports crypto transactions, does not show controlled exchange trades.
Despite the foundation’s purpose of transparency, investors have voiced worries regarding the money.
Blockchain lets us trace money going to centralized services. Tom Robinson, co-founder of Elliptic, doesn’t know why these payments were moved or whether they went to another actor or personal accounts.
The Luna Foundation Guard didn’t reply to The Wall Street Journal’s calls or emails. Mr. Kwon didn’t comment. Remaining TerraUSD holders will get $106 million in assets, beginning with lesser interests. No information was offered about this compensation.
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