Luna Foundation Guard (LFG) is a non-profit organization with the goal of supporting and helping the Terra (LUNA) ecosystem grow. To do this, they had acquired a bitcoin (BTC) reserve of 70,736 bitcoins, worth approximately $2 billion. This reserve would be used to keep the stablecoin stable if it fails with LUNA.
Despite the huge amount of BTC bought, the reserves were still unable to save UST. The stablecoin must, as the name suggests, represent a value of $1. At the time of writing, this stablecoin is only worth $0.17, a significant drop.
In the meantime, LFG has provided a loan on this bitcoin reserve to over the counter (OTC) investment companies to protect UST. This should leave $1.2 billion worth of bitcoin in reserve. The organization has not yet announced anything about this reserve.
Of course we can look into the wallet of the LFG via the blockchain, but we see that there are no more bitcoins in this wallet. This wallet data was announced on May 9 via Twitter:
Last clip drawn by the LFG was ~37K BTC. Similar to the last deployment, it has been loaned to MMs.
Very little of the recent clip has been spent but is currently being used to buy $UST†
— LFG | Luna Foundation Guard (@LFG_org) May 9, 2022
But where are those bitcoins?
Out on chain data shows that all 70,736 bitcoins have disappeared from LFG’s reserves. LFG itself has indicated that it needs another billion dollars to protect the stablecoin. However, it seems that LFG may not need the BTC anymore as the company is no longer reporting on it. In addition, the Terra founder thinks that UST may no longer be salvageable.
So where exactly all the bitcoins from the reserve have gone or what they were used for, remains a mystery for the time being. Cryptocurrency researcher Mika Honkasalo has this to say:
“Pretty tacky that no one knows what LFG has done with the billions in BTC collateral.
I assumed they were sold, but a lot of rumors are going around that they still have most of them.”
Pretty tasteless that no one knows what LFG has done with the billions in BTC collateral.
Assumed they had sold, but a bunch of rumors they still hold most of it.
— mhonkasalo (@mhonkasalo) May 13, 2022