Terra adds to Bitcoin demand with $10B purchase plan

Terra intends to purchase and hold Bitcoin worth up to $10 Billion, Terraform Labs claims. This huge haul will be used to support the stablecoin TerraUSD.

Terra will no longer be holding cash reserves or other cash equivalents. Instead, Terra will hold enough BTC in order to support all UST currently in circulation.

That, essentially, is the main script around Terra’s plan to purchase BTC worth up to $10 billion. CNBC ran a commentaryTerra, Tuesday morning

Terra’s UST plans add to Bitcoin demand

Do Kwon (CEO Terraform Labs) announced that Terraform Labs has purchased $135 Million worth of Bitcoin. This will bring its total Bitcoin purchases for 2022 up to $1 Billion. 

Kwon commented earlier on the decision to buy as many Bitcoins as possible.

“UST with $10B+ in BTC reserves will open a new monetary era of the Bitcoin standard. P2P electronic cash that is easier to spend and more attractive to hold Bitcoin”

Like other stablecoins UST is tied 1:1 to the US Dollar and its value remains stable despite extreme volatility. This stablecoin is looking to change from being an algorithmic, decentralised currency that was backed with cash reserves to one that is backed entirely by Bitcoin.

Indeed, the aggressive accumulation of whales has been one of the stories that has pushed Bitcoin higher in recent days. Bitcoin surged to $48,000 on Monday. This brings its 30-day gains over 20% and pushes its value into positive territory for the year.

Terra’s LUNA also gained big, breaking from around $90 this past week to hit highs above $106. Meanwhile, UST’s market cap rose to over $16 billion to make it the 14th largest crypto project.

Pay attention to regulations?

A CNBC report on Terra’s big bet on Bitcoin and UST says some analysts are warning this “might not sit well” with US regulators. This is because regulators previously raised concerns about stablecoins and the potential for them to pose risks to financial systems.

Janet Yellen, Treasury secretary, said that the US will look at a regulatory framework for crypto innovation. But there are still concerns over stablecoins.

In 2021, Terraform Labs CEO Do Kwon was subpoenaed by the SEC. This followed allegations of US law-breaking. Kwon sued the SEC again, and earlier this year, a US judge ordered Terra to obey the subpoenas.

Could UST get more attention right now? CNBC analysts say that it could, and any developments will come even as legislators look to accelerate the development of a virtual dollar.