Demand for UST Keeps Rising, Luna Foundation Guard to Burn 4.2 Million LUNA From Treasury

The Luna Foundation Guard (LFG), a nonprofit organization, has announced new measures to keep the supply of UST, the flagship stablecoin of the Terra ecosystem, liquid in secondary markets. The protocol has already reached the max issuance of UST per day, but demand is strong enough that the foundation will have to burn more LUNA to guarantee the supply of UST in these markets.

The Luna Foundation Guard, an organization dedicated to supporting projects from the Terra ecosystem, has decided to act to increase the supply of UST in secondary markets. The most common way of obtaining UST, the dollar-pegged stablecoin of the Terra ecosystem, is to burn LUNA in the protocol treasury. However, due to the increased demand for UST, the maximum quantity of the stablecoin is being issued each day, leaving a lot of investors without access to the currency.

These investors then have to go to secondary markets such as exchanges and decentralized finance applications to satisfy demand. As such, the Luna Foundation Guard council voted in favor of burning 4.2 million LUNA to UST and selling it to markets like Curve, whose stablecoin pools have been losing balance due to the high demand.

This is the second time that the organization has decided to step in to restore the balance in Curve pools this month. Just recently, the foundation decided to act in the same way, announcing they had decided to burn 5 million LUNA to issue UST that was used to fix these imbalances.

The proceedings of that operation were used to buy bitcoin for the treasury, and the Luna Foundation Guard also decided to use funds from this latest operation to buy more bitcoin for the forex reserve used to support UST’s price in moments of market stress.

A large part of Terra’s attraction for investors seems to be Anchor, a protocol that lets its users earn interest of almost 20% on the UST deposited. At the time of writing, Anchor has amassed almost 10 million UST in deposits. LUNA, the stabilizing partner token of the Terra protocol, has also benefited from this action. LUNA is now sitting at almost $100, with a rise of more than 50% in value in the last 30 days, according to data from Coingecko.

What do you think about the movements of the LFG to balance UST’s secondary markets? Tell us in the comments section below.