LUNA phenomenon: a predicted pattern or a perfect occurrence of random events?

Luna Foundation Guard (LFG) is a non-profit organization established in the Republic of Singapore whose main purpose is supporting the advancement of open-source technology. According to the self-description, LFG creates and provides greater economic sovereignty, security, and sustainability of open-source software. A huge part of the project is devoted to the applications that help build and promote a truly decentralized economy.

The Luna Foundation Guard reportedly managed to raise the capital investment — one of the industry’s largest ever — in a private sale of LUNA tokens.

The LFG is primarily focused on Terra. Terra is a decentralized, open-source public blockchain built to support a suite of fiat-pegged, algorithmic stablecoins. The foundation facilitating the growth of the Terra ecosystem, and improving the sustainability and stability of Terra’s algorithmic stablecoins.

Primarily, this includes TerraUSD (“UST”) — the pioneer stablecoin of the Terra network and the leading decentralized stablecoin in DeFi by market cap.

DeFi requires a scalable, robust, and censorship-resistant form of money at the base layer of its technology stack. Stablecoins have established themselves as the preferred medium of interacting with DeFi, because price-volatile assets predominating the industry have failed to fulfill the stability sought for.

Unlike other stablecoins that are backed by fixed deposits of the pegged fiat currency or over-collateralized in another DeFi asset, the value of Terra’s family of stablecoins is maintained through a system of arbitrage incentives, open market operations, and dynamic protocol levers that maintain robust peg stability and scalability of its supply without the centralized control or capital-inefficient designs of incumbents. This is primarily accomplished by the Terra protocol design, which, through its native staking, governance, and reserve asset, LUNA, delivers permissionless arbitrage incentives and counter-cyclical monetary policy levers to maintain the peg during periods of both contractionary and expansionary demand cycles of its stablecoins.

Recently the project’s founder and CEO confirmed that it had bought over $1 billion in Bitcoin since January. Thus, the Luna Foundation Guard’s bitcoin wallet was valued at $1.1 billion on March 26, 2022. Besides, the Terra’s inventor Do Kwon has hinted about the blockchain project employing bitcoin-linked tokenomics. The both factors resulted in LUNA spiking more than 10%, reaching a new record high of $106.14, according to CoinMarketCap. According to Kwon, a Bitcoin reserve will help improve UST’s ability to keep its dollar peg, LFG is keen. He added: “UST is going to be the first internet native currency that implements the Bitcoin standard as part of its monetary policy.”

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