Luna Foundation Guard drains $3bn from reserve to rescue UST

The non-profit Luna Foundation Guard (LFG) disclosed information about the state of its reserve fund after attempts to rescue the algorithmic stablecoin TerraUSD (UST).

In early May, LFG additionally purchased bitcoins worth about ~$1.5 billion and increased its balance in the primary cryptocurrency to 80,394 BTC. As of May 7, the foundation held assets in several other crypto assets, including Tether (USDT), USD Coin (USDC), Binance Coin (BNB), Avalanche (AVAX), as well as UST and the Terra token (LUNA).

Analysts at The Block Research calculated that the total value of coins in the reserve fund was almost $3.2 billion.

On May 8, UST lost its peg to the US dollar. This occurred amid outflows from Anchor Protocol due to the deposit yield dropping to 17.87%.

On May 10, the asset’s quotes dropped below $0.62. The decline continued on May 11, after which the Terra token used to mint UST, LUNA, collapsed to $0.3.

The LFG team spent around $26.3 million in USDT, around $23.5 million in USDC and 33,206 BTC to repurchase excess supply of the coin. A further 47,188 BTC moved within the organization was not disclosed.

As of May 17, LFG reported holdings of 313 BTC and the previous amounts in BNB and AVAX. The volumes of the organization’s devalued UST and LUNA holdings rose significantly. According to The Block Research, the value of the reserves fell to about $268.3 million, and excluding project tokens it stood at about $87 million.

Following LFG’s publication on the fund’s status, the price of the stablecoin collapsed from around $0.14 to near $0.09.

LUNA prices fell below $0.0002 (CoinGecko).

The LFG said it hoped to use the remaining assets to compensate UST users, primarily small holders.

Earlier, Vitalik Buterin urged the project to focus on compensating losses for small investors.