Cryptovers: 10 Billion Reasons Why Bitcoin Become a Reserve Coin

April 12 (Reuters) – The crypto platform has pledged to raise $ 10 billion worth of bitcoin to support its own “staplecoin”. It is part of a broader movement to crown Bitcoin as the reserve currency of the New Age.

According to publicly available blockchain data, Seoul-based Terraform Labs has so far purchased 40,000 bitcoins in a row through a $ 1.7 billion non – profit subsidiary, the Luna Foundation Card.

Following Terraform co-founder Du Gwon’s announcement on Twitter last month, the plan will buy $ 10 billion worth of Bitcoin reserves in support of TerraUST, breaking the rankings with other major staplecoins – the ballooning class of cryptocurrencies. Usually supported by US dollar reserves.

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A staplecoin backed by Bitcoin reserves, according to Kwon, “will open a new monetary era of the Bitcoin standard”, which refers to the quality of gold that was the backbone of the World Fund a century ago.

Acquisitions and anticipation support the price of Bitcoin, with some market players identifying it as a major driver for Bitcoin’s return to $ 48,000 at the end of March. Even more significant, perhaps, is whether others will follow the path of terraform.

Syd Powell, chief executive of Sydney-based CryptoLender Maple Finance, said: “The $ 10 billion acquisition could move prices in the short term.

Yet other market participants warned that the ever-closer adaptation between staplecoins such as Bitcoin and Terroyst could pose a new risk to crypto markets, raising the possibility of a “death vortex” for investors.

Anyway, it’s worth seeing.

In the short term, there are risks.

“Some people run the risk of trying to hold on long before they buy, which could exacerbate the fall if prices begin to recede,” said Richard Usher, head of OTC trading at PCB Group, a crypto company based in London. Month for an advanced risk environment.

Vetle Lunde, an analyst at Arkane Research, a Norwegian-based crypto research firm that monitors Terra project purchases, estimates that it could eventually hold between 60,000 and 70,000 bitcoins to reach $ 10 billion in reserves.

It surpasses Tesla’s (TSLA.O)’s 43,200 Bitcoin, making it the second largest public sector company in stock after Microstrategy (MSTR.O).

Terraform Labs did not respond to a request for comment.

Purchase of LFG Bitcoin

Earth and Moon

Stablecoins are gaining ground fast. They are a common transfer medium and are often used by traders who want to move funds and speculate on other cryptocurrencies.

For example, it is much easier to convert tether to Bitcoin or other cryptocurrencies – the larger and more mature staplecoin – than to convert US dollars to Bitcoin.

One year ago, Tether’s market value was $ 44.5 billion. According to CoinMarketCap, they rose 85% and 850% to $ 82.3 billion and $ 16.7 billion, respectively.

TerraUSD is now the fourth largest staplecoin, and is linked to the dollar just like its counterparts. However, Tether and USD Coin have traditional assets that they claim match the value of tokens in circulation, while TerraUSD maintains its 1: 1 dollar balance by an algorithm. Another balance token, Luna.

Bitcoin reserves theoretically keep the Terra project afloat while another level is promising.

Matthew Sigel, head of VanEck’s digital assets research in New York, said Bitcoin gives people more confidence – not just in terms of price, but in terms of rules and personality – to support something predictable.

He said he expects other algorithmic staple coins to follow in Terra’s footsteps and back up their currencies with bitcoin reserves and other cryptocurrencies if the test is successful.

The Death Spiral

However, not all algorithmic fixed currencies have been stable in the past, with some losing their pegs and falling in value.

Carlos Gonzalez Campo, analyst at 21Shares in Switzerland, said, “There is still a lot of work to be done and regulatory uncertainties and their resistance to the decline of contractions must be overcome,” said Carlos Gonzalez Campo, analyst at 21Shares in Switzerland. .

“This event marks a theoretical vicious circle where UST (TerraUSD) abstract LUNA is printed and leads to lower prices, which leads to fear and higher UST recovery,” he said.

This is where the presence of bitcoin should be avoided, but it can also cause widespread infections.

“It’s very good to have a little reserve outside of Luna, otherwise you’re exposed to its performance, which can break everything as we have seen with other algorithmic staplecoins,” said Lunde of Arkan.

“But I’m a little worried about the long – term structural effects this could have on Luna and Bitcoin. If things really start to break down, they would like to use the 70,000 Bitcoins in stock to stabilize and maintain the market. Peck, it could have an impact on the whole market.”

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Mehta Singh and Lisa Paul’s Batticaloa report in Bangalore; Editing by Alun John and Pravin Sir

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