The Luna Foundation Guard (LFG) voted to deploy its $1.5 billion UST and Bitcoin reserve. Not only that, but it was also to repeg UST to the US dollar. This happened as Terra UST started to slide from its dollar peg to $0.985 last weekend.
Deploying its UST and Bitcoin reserve was to implement LFG’s code-red technique that it had planned for months.
Amassing $3.5-B crypto reserves
Since January, LFG, the nonprofit charged with overseeing the Terra ecosystem’s health, has amassed nearly $3.5 billion in Avalanche, LUNA, UST, and Bitcoin reserves for use if UST falls below $1. According to LFG, this lent cash would be utilized to purchase vast quantities of UST. The purpose was to generate buy pressure that would force the stablecoin’s price back up to its planned level.
The fate of billions of Bitcoin reserves that the Luna Foundation Guard said it deployed to safeguard UST has been revealed in a new study.
On Monday, only hours after its implementation of this so-called code-red technique, UST began to fall and continued to fall. LFG’s reserves were almost depleted by Tuesday when the price of UST plummeted to previously unheard-of lows.
Despite this, the stablecoin was not saved. By the end of the week, UST had fallen to $0.13, wiping away $40 billion in value and eliminating Terra’s native token LUNA.
The 64-dollar question
The colossal failure of Terra’s backup approach raises the question: where did that $3.5 billion go? What happened to it?
According to the blockchain analytics platform Elliptic, a Bitcoin address affiliated with LFG transferred around $750 million worth of Bitcoin to a new address on Monday, hours after the announcement of the $1.5 billion loan. That evening, other LFG-affiliated wallets transmitted an additional $930 million worth of Bitcoin to the same new address. This sum, 52,189 Bitcoin valued at nearly $1.6 billion, was subsequently transferred from the new address to a single Gemini account.
It’s unclear if the Bitcoin in those Gemini and Binance accounts was sold to acquire massive sums of UST. It’s impossible to tell if such large quantities of Bitcoin were sold or transferred to any of LFG’s other wallets.