Terra buys $200 million in AVAX for reserves

Terra Foundations—LFG and TFL— buy $200 million worth of AVAX tokens to back TerraUSD's treasury reserves

By Shashank Bhardwaj

Image: Shutterstock

In a strategic move to push forward cross-chain development and diversification, Terra has purchased $200 million worth of AVAX tokens from the Avalanche Foundation to add to its TerraUSD reserves.

The Luna Foundation Guard (LFG) and Terraform Labs (TFL)—the two organisations behind the Terra blockchain—made an announcement that they had collectively acquired $200 million worth of AVAX tokens. A spokesperson from Ava Labs confirmed that LFG had made a purchase of $100 million AVAX tokens in exchange for its UST stablecoin in an over-the-counter (OTC) trade.

TFL struck the other half of the deal by swapping $100 million worth of LUNA tokens for AVAX tokens to ‘strategically align ecosystem incentives’, as per a tweet from Terra. The treasury swap was initiated to mark Terra’s commitment to Avalanche for cross-chain development and further collaboration. Terra and Avalanche are currently working together on a gaming subnet project, the details of which will be released later on.

Do Kwon, the founder of Terraform labs, says that LFG selected Avalanche because they found Avalanche's robust ecosystem and user loyalty a marker for stronger growth prospects for the Layer-1 ecosystem. He says, “Avalanche is still a growing ecosystem—a lot of it is fueled by loyalty to the AVAX token, and users feel a lot of affinity with an asset that aligns itself with AVAX […] whereas for the average Ethereum user, aligning yourself with Ether doesn’t really mean that much.”

Earlier, Terra’s co-founder Do Kwon had pledged that LFG would acquire up to $10 billion worth of Bitcoin to add to Terra’s treasury reserves. Since then, LFG has been actively buying bitcoins and has added $1.6 billion worth of bitcoins to its reserves to date. These bitcoins would be used to back its UST stablecoin.

The Avalanche deal adds a sizable chunk of the second Layer-1 tokens to Terra’s treasury reserves and diversifies it beyond Bitcoin. The Avalanche Foundation now has $100 million worth of LUNA and $100 million worth of UST post the dual-deal. Jon Wu, Ava Labs’ President, was quoted saying, “AVAX is an excellent reserve asset to complement bitcoin [BTC] in the LFG treasury. This is just the beginning for these two communities together. We’ll see more assets, applications, and novel subnet collaborations flourish out of this new connection.”

Post this development, the price of the AVAX token went up from $84 to $87.90 at the time of writing, registering a gain of over 4.7 percent while LUNA, Terra’s native token, had gathered the price of $102.04 as per CoinMarketCap. Both Avalanche and Terra seem to be optimistic about this partnership. Avalanche’s founder Emin Gun Sirer believes that the present partnership will result in more Terra applications expanding their base to the Avalanche blockchain.

Shashank is founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist.

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