Terra founder reveals what will happen to UST if Bitcoin price crashes

Terraform Labs CEO Do Kwon has conceded {that a} crash within the worth of Bitcoin could be “adverse” for the steadiness of the UST stablecoin, however that he expects Bitcoin to go up.

Terraform Labs is the entity behind the Terra (LUNA) blockchain platform which plans on shopping for a complete of $3 billion in Bitcoin as a reserve for the UST stablecoin.

Kwon made the feedback in an interview on the Unchained podcast on Mar. 29. Host Laura Shin requested Kwon what the brief time period implications of holding a lot BTC might be for the steadiness of UST.

Kwon mentioned “the worst case could be if we have been shopping for Bitcoin and a crash occurs six months later, and it’s correlated with an enormous fall in demand for UST” which might be, as he modestly put it, “adverse.” Nonetheless, that state of affairs is not retaining him up at evening:

“I’m kind of betting that the long run state of affairs of Bitcoin going up and the reserves being robust sufficient to face up to UST demand drops is the extra probably state of affairs.”

Kwon has been shopping for Bitcoin (BTC) to carry in Terra’s treasury as 40% of the collateral for the UST stablecoin. Up to now, Terra has acquired 30727.9 BTC, and most not too long ago bought 2,943 BTC on Mar. 29. This makes Terra the third largest single-wallet BTC holder.

Crypto YouTuber danku_r argued to his 54,000 followers in a Mar. 30 tweet that the addition of BTC to Terra’s treasury would assist mitigate the impression of a sudden retraction in UST demand. He mentioned that Terra’s transfer would assist avert a “dying spiral as a consequence of market uncertainty” by serving to the treasury “swallow the provision contraction of UST.”

One in every of Kwon’s acknowledged targets for the treasury, often called the Luna Basis Guard (LFG) is to make Terra “the biggest single-wallet holder of BTC.” In an effort to dethrone the present chief, Michael Saylor’s MicroStrategy, Kwon might want to amass greater than 125,051 BTC in keeping with Bitcon pockets tracker Bitcoin Treasuries.

In accordance with @stablekwon, @terra_money is a Layer 2 answer for BTC the place “Bitcoin solely must be good at being one factor, being an asset.” What do you suppose – will Terra be the layer 2 for bitcoin?

Episode hyperlink: https://t.co/T2nVfg7VyC pic.twitter.com/Thi9nVKUHv

— Laura Shin (@laurashin) March 31, 2022

Later within the interview, Kwon lived as much as his fame as a provocateur by proclaiming that Terra is a Layer-2 answer for the Bitcoin community. He argued that with Terra, Bitcoin has a bridge that enables it for use “throughout a mess of purposes from DAOs to NFTs to DeFi.”

“And by way of the expressivity, the transaction capabilities, the throughput, all these issues can occur on Terra.”

Associated: ‘Maintain my beer’ — Terra already up $165M from shopping for Bitcoin as BTC stash nears Tesla’s

Kwon’s remark drew the eye of the crypto neighborhood. In a tweet, Ethereum (ETH) developer antiprosynthesis responded by asking if all entities that use BTC to again a stablecoin ought to be thought of Layer-2 options. He mentioned, “Even I do not imagine that Bitcoin’s requirements have plummeted to such extent.”

A Layer-2 answer helps a Layer-1 blockchain to scale up its operations by shifting many transactions to an alternate community to scale back congestion.

BTC is buying and selling at $44,463, down 5.61% over the previous 24 hours in keeping with Cointelegraph Value Index.