In the long-term, Do Kwon plans to buy a total of $10 billion worth of Bitcoin to back the Luna-based stablecoin UST.
The Luna Foundation has confirmed it has already raised $2.2 billion for its bitcoin reserve via OTC sales of Luna and trading UST for tether. In the short-term it hopes to reach $3 billion worth of Bitcoin in its reserves.
As blocks of $125 million worth of tether are being moved on to exchanges some are speculating this may be Do Kwon getting ready to buy more Bitcoin, though these rumors are not confirmed.
Earlier, Do Kwon took shots at bears on crypto twitter who have recently taken to calling themselves “goblins.”
Meanwhile, Bitcoin prices are up 2.4% in the last 24 hours with some saying that we are preparing for a large move up as many technical indicators have turned bullish and we are breaking out of key resistance levels.
The Bitcoin in the reserve will likely be used to strengthen the peg of UST to the US Dollar. By maintaining a large reserve, the Luna Foundation will make it possible for users to redeem UST for bitcoin, in an effort to instill confidence in the peg.
A research paper criticized algorithmic stablecoins like UST as being “fragile” because of their uncollateralized nature. They argue that the inherent uncertainty of demand, incentives, and price information could lead to a catastrophic failure of algorithmic stablecoins during times of financial crisis or high volatility.
Do Kwon argued that the massive reserves of Bitcoin will help UST maintain its peg even when there is massive volatility and uncertainty in the market.