The Luna Foundation Guard (LFG), the non-profit overseeing the Terra ecosystem, said that it sold almost all of the $3.5 billion bitcoin it held in reserve “as a last ditch effort to defend the [UST] peg.”
According to a Twitter thread, the stash is now down to just 313 BTC, valued at just over $9.2 million at current prices. The reserve also consists of several other cryptocurrencies, including AVAX, BNB, UST, and LUNA, with a total value of less than $80 million.
The Foundation had amassed the equivalent of 80,394 bitcoin in reserve, or about $3.5 billion, by May 7, one day before the spectacular collapse of the UST algorithmic stablecoin and Terra’s LUNA token.
But the reserve collapsed after UST, Terra’s native stablecoin built to maintain a 1:1 peg with the US dollar, fell to $0.07. LUNA plunged from $80 to $0 in just three days, in a crash seen by some analysts as a coordinated attack on the blockchain.
Amid the panic, the Foundation stepped in, tapping more than 80,000 BTC from its reserve in an attempt to defend the peg. LFG said it sold the bitcoin directly through swaps on-chain, and via transfers to an unnamed “counterparty”, helping to speed up large trades on “short notice”.
LFG sold a total of 52,189 bitcoins, worth over $1.6 billion, to the “counterparty”, which was then transferred to an account on US crypto exchange Gemini. On May 10, in a “last ditch effort to defend the peg”, Terraform Labs, the company behind the Terra blockchain, sold an additional 33,206 BTC in exchange for over $1.16 billion UST.
The intervention failed.
Luna Foundation to repay users starting with the smallest
LFG said that it would use the remaining assets to compensate users who lost money following the collapse of UST. The smallest holders will be paid first, it added.
“We are still debating various distribution methods,” said the Singapore-based organization, which initially planned to buy up to $10 billion worth of bitcoins by the end of September to back the UST stablecoin.
The Foundation has been under pressure to make the disclosure since the fall of Luna. Many people on Twitter raised questions about how Do Kwon, the Terra CEO, and his team handled the reserve fund following the Terra ecosystem collapse.
At the time of writing, the UST was down 58% to $0.065 in the previous 24 hours, according to CoinGecko. LUNA fell 39% to $0.0001.
