Non-profit organization Luna Foundation Guard (LFG) is investing $100M in Avalanche Project AVAX tokens to expand reserves and improve the sustainability of UST’s algorithmic stablecoin, Bloomberg has learned.
LFG will purchase tokens from the Avalanche Foundation for UST during an off-exchange transaction. Unlike the organization’s bitcoin reserves, AVAX will be stored on the asset’s native blockchain.
LFG started buying digital gold at the end of last month. Kwon then explained with the formation of the reserve, the UST will become a “hybrid” stablecoin – if the asset price drops below $1, the reserve pool will “promptly” provide the liquidity necessary to maintain a stable price.
This pool works similarly to the on-chain UST issuance mechanism. However, instead of burning LUNA, it is about supplying and holding wrapped BTC. In the case of AVAX, only the reserve asset changes.
