Terra Is Approaching Tesla in Bitcoin Stocks
At the end of March, the co-founder of the Terra blockchain project, Do Kwon, announced his intention to create a reserve from Bitcoin to provide the UST stablecoin with liquidity. In three weeks, the company spent $ 1.5 billion, and the address balance increased to 42.4 thousand BTC. This brings it closer to Tesla (NASDAQ:TSLA), whose cryptocurrency assets are estimated at 43.2 thousand BTC.
UST is an algorithmic stablecoin, and its issue is mathematically related to the money supply of the internal LUNA coin.
In case of increased demand for UST, LUNA validators receive additional remuneration. If demand falls, part of the LUNA is burned. Simply put, a developer can’t print more UST if he wants to.
This radically distinguishes algorithmic stablecoins from centralized ones, where the liquidity of the coin depends on the volume and quality of reserves. For example, Tether holds about half of the reserve in publicly undisclosed securities instead of the promised foreign exchange savings in US dollars. This means that the company often lends stablecoins in exchange for debt obligations. Previously, this has already led to scandals, so in January 2018, Tether printed $850 million worth of tokens to provide a loan to Bitfinex.
Despite the fact that UST is a mathematically balanced stablecoin, Terra decided to strengthen its position with an additional reserve from Bitcoin. At the initial stage, the company plans to spend $ 3 billion from its own fund, and in the long term to increase the reserve to the equivalent of $ 10 billion. Now such a purchase would make Terra the largest public holder of Bitcoin, leaving far behind MicroStrategy (NASDAQ:MSTR) with its stock of 125 thousand. BTC ($5.2 billion).
UST has less than $0.5 billion of capitalization left to overtake BUSD and become the third largest stablecoin. At the same time, in DeFi, the Terra blockchain already occupies the second position with $19 billion of blocked funds, and the LUNA coin is the only one of the TOP 10 that was able to update the historical maximum in 2022.