On Thursday, Terra announced that it had acquired Avalanche (AVAX) tokens worth $100 million in a ‘treasury Swap’ between LUNA and AVAX to augment its reserves. This OTC deal to add the said AVAX tokens to UST reserves makes AVAX the first major cryptocurrency besides bitcoin to find its way into the stablecoin’s reserve.
“TFL is committed to building & supporting new $UST-native protocols within the Avalanche ecosystem to maximize its cross-chain footprint and has executed the separate $100 million Treasury Swap for AVAX to demonstrate its commitment to Avalanche.” The Twitter announcement read.
Terra whose purchases are buoyed by The Luna Foundation Guard (LFG), further stated that the AVAX swap marked “the beginning of a diversified and non-correlated asset pool supporting the $UST peg” signaling the possibility of adding other cryptocurrencies in the future. The AVAX purchase will not only be used to back Terra’s UST reserve but will also help both ecosystems thrive by connecting the LUNAtics & Terra builders with the vibrant Avalanche ecosystem, ushering in an immersive cross-chain experience.
The AVAX foray comes on the heels of Terra’s continued accumulation of Bitcoin which it plans on using to back TerraUSD (“UST”) – the flagship stablecoin of the Terra network and the leading decentralized stablecoin in DeFi by market cap.
“None can deny that avalanche is one of the most exciting ecosystems in web3.” Do Kwon the Founder and CEO of Terraform Labs tweeted following the purchase. He expressed his belief in the future of blockchain networks being cross-chain stating that the alliance between Avalanche and Terra is the biggest ever formed in web3.
Terra now plans on using the AVAX acquired by LFG “to provide a large reserve against $UST using the automated mint mechanism identical to one designed for $BTC.” This means that UST will become pegged to AVAX, enabling it to be minted and redeemed against the layer 1 coin.
Kwon further stated that they would start to “cwover initial bootstrapping costs” for select projects that use UST in the AVAX ecosystem including audit costs. Furthermore, they would be putting boots on the ground to grow Avalanche. “We will create a cluster of top assets in the Avalanche ecosystem,” Kon added, calling on AVAX projects to engage with the Terra community to spur growth.
Kwon has previously stated that they will not stop buying Bitcoin until Terra is the second-largest BTC whale after Satoshi Nakamoto, a goal he hopes to achieve after buying $10 billion worth of BTC. This week, Terra has purchased an additional 5,040 BTC, bringing its reserves to 35,767.98 BTC.