The entire cryptocurrency community is buzzing on Do Kwon’s latest tweets, and Terra’s recent bitcoin buys. Are they the reason for the most recent rally? Let’s dig in.
Terra buys bitcoins
Do Kwon, co-founder and CEO of Terraform Labs, the company building the Terra protocol and ecosystem – set the cryptocurrency community on fire a few days ago with a single Tweeter.
UST with $10B+ in BTC reserves will open a new monetary era of the Bitcoin Standard. P2P electronic cash that is easier to spend and more attractive to hold.
The post sparked a massive discussion, and one of the first to jump in was none other than Adam Back – a well-known Bitcoin supporter and co-founder and CEO of Blockstream. He asked where the money came from, to which Do Kwon replied:
It’s not 10B today – as UST money supply grows a portion of the seigniorage will go to build BTC reserves bridged to the Terra chain.
We have 3B funds ready to seed this reserve, but the technical infrastructure (bridges, etc.)
Jump Crypto Proposes Bitcoin Reserve Pool
Jump Crypto subsequently submitted a Terra community proposal regarding how the LFG pool can deploy its Bitcoin reserve to defend the UST peg.
This pool is intended to facilitate “rapid BTC liquidity” aimed at supporting the UST when the peg deviates lower, and it would rely on traders to replenish the reserve when the turbulence passes.
In essence, it would closely resemble how LUNA and UST’s on-chain mechanism works, but the LFG pool would hold wrapped BTC, which would also require it to use a different architecture. Also, the pool should use different exit and entry liquidity parameters.
$125 million in BTC purchases at once
And while some scoffed at the idea, Do Kwon went ahead with his plan. Tracking their purchases was the popular crypto commentator Pentoshi, who noted that Terra’s current BTC holdings currently stand at 21,323.
Terra has been buying in batches of $125 million, and Pentoshi argued that:
2.5-3,000 BTC per day of supply removed over a long period = huge impact. Those who are short need to hedge more at some point as the supply dissipates. What is rare, becomes more so. This clip can bring back the monkeys, in which Do Kwon is the monkey lord.
