Singapore-based Luna Foundation Guard raises $1 billion in a round led by Jump Crypto and Three Arrows Capital to found a Bitcoin-denominated UST reserve.
“One common criticism of algorithmic stablecoins is their reflexive nature and the hypothetical risk of a"bank run" scenario where demand to sell the stable outstrips supply in a way that causes compounding price decreases in both native tokens,” said Terra.
Terra said it chose to denominate the Forex Reserve in Bitcoin because it considered the crypto asset"less correlated to the Terra ecosystem." The platform said that more details on the UST reserve’s function and design would be released in the coming weeks.it utilizes “basic market forces of supply and demand” to maintain a stable price for coins including UST:
"Stablecoins are only valuable to users if they maintain their price peg [...] When the demand for Terra is high and the supply is limited, the price of Terra increases. When the demand for Terra is low and the supply is too large, the price of Terra decreases."
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