The Luna Foundation Guard (LFG), a nonprofit organization, has announced new measures to keep the supply of UST, the flagship stablecoin of the Terra ecosystem, liquid in secondary markets. The protocol has already reached the max issuance of UST per day, but demand is strong enough that the foundation will have to burn more LUNA to guarantee the supply of UST in these markets.
Luna Foundation Guard will burn 4.2 million LUNA for UST
The Luna Foundation Guard, an organization dedicated to supporting projects in the Terra ecosystem, has decided to act to increase the supply of UST in the secondary markets. The most common way to obtain UST, the dollar-pegged stablecoin of the Terra ecosystem, is to burn LUNA into the protocol treasury. However, due to increased demand for UST, the maximum amount of stablecoins are issued every day, leaving many investors without access to the currency.
These investors then have to go to secondary markets such as exchanges and decentralized finance applications to satisfy demand. As such, the Luna Foundation Guard council voted in favor of burning 4.2 million LUNA to UST and selling it to markets like Curve, whose stablecoin pools have been losing balance due to the high demand.
Anchor attraction
This is the second time the organization has decided to step in to restore balance to Curve pools this month. Just recently, the foundation decided to do the same, announcing that it had decided to burn 5 million LUNA to issue USTs which were used to correct these imbalances.
The proceedings of that operation were used to buy bitcoin for the treasury, and the Luna Foundation Guard also decided to use funds from this latest operation to buy more bitcoin for the forex reserve used to support UST’s price in moments of market stress.
A big part of Terra’s appeal to investors appears to be Anchor, a protocol that allows its users to earn nearly 20% interest on deposited UST. At the time of writing, Anchor has amassed almost UST 10 million in deposits. LUNA, the stabilizing partner token of the Terra protocol, also benefited from this action. LUNA now sits near $100, with a more than 50% rise in value over the past 30 days, according to data from Coingecko.
