Terra buys $ 200M into AVAX for reserves as rival stablecoins emerge

Terraform Labs (TFL) and the Luna Foundation Guard (LFG) have announced that they have purchased a combined $ 200 million worth of AVAX tokens from the Avalanche Foundation.

TFL, the company responsible for developing the Terra blockchain, exchanged $ 100 million worth of Terra’s native token, LUNA for AVAX tokens, to “strategically coordinate ecosystem incentives,” according to Terra’s twitter,

LFG, a non-profit organization mandated to build reserves for Terra’s algorithmic stablecoin UST, used its own holdings of UST to purchase an additional $ 100 million worth of AVAX from the Avalanche Foundation.

These acquisitions are intended to strengthen the stability of Terra’s domestic UST stablecoin, which currently has a market capitalization of $ 16.7 billion.

Do Kwon, the founder of Terraform Labs, told Bloomberg that LFG selected AVAX for its UST reserves because of solid growth in the blockchain ecosystem and also the strong loyalty of its users.

“Avalanche is still a growing ecosystem – many of which are driven by loyalty to the AVAX token and users feel a lot of affinity with an asset that matches it with AVAX … while for the average Ethereum user, vote for yourself with Ether does not really mean that much. “

As Terra continues to strengthen UST’s position, competitors are looking for new ways to dethrone the stable coin. Near Protocol (NEAR), a Layer-1 blockchain and competitor for both Ethereum and Terra, is rumored to be releasing a stable coin called USN, which will likely also offer a decentralized financial protocol that gives users a 20% annual percentage return can deliver (APY) on their USN deposits.

This is in line with the Terra Ecosystem’s Anchor Protocol, which currently offers users a 19.49% APY on UST deposits.

In a Substack post detailing what he understands of the plans, the founder of Crypto Insiders Telegram group Zoran Kole stated that Near Protocol was superior to both Etheruem and Terra, providing data from Electric Capital that the Substantial growth of Near Protocol outlines in terms of development.

Source: Zoran Kole

Kole concluded that Near’s network growth combined with its soon to be released USN stablecoin and subsequent DeFi protocols could eventually allow Near Protocol to capture a $ 11.7 billion market cap and eventually Eclipse Terra, which has a market cap of $ 37.2 one billion.

“This will lead to a comparison of Near to Terra ($ LUNA) as the story for attractive stablecoin yields proliferates.”