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

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

TFL, the company responsible for the development of the Terra blockchain, swapped $100 million of Terra's native token, LUNA, for AVAX tokens, to "strategically align ecosystem incentives," according to Terra. twitter.

LFG, a nonprofit tasked with building reserves for Terra's UST algorithmic stablecoin, used its own UST holdings to purchase AVAX for an additional $100 million from the Avalanche Foundation.

These purchases are intended to bolster the stability of Terra's native UST stablecoin, which currently has a market cap of $16.7 billion.

Do Kwon, the founder of Terraform Labs, told Bloomberg that LFG selected AVAX for its UST reserves due to strong growth in the blockchain ecosystem, as well as strong user loyalty.

“Avalanche is still a growing ecosystem – much of it is fueled by loyalty to the AVAX token and users feel a lot of affinity with an asset that aligns with AVAX…whereas for the average Ethereum user, aligning with Ether does not. it really means a lot.

the earth continues to get stronger UST's position, competitors are looking for new ways to dethrone the stablecoin. Near Protocol (NEAR), a layer 1 blockchain and a competitor to both Ethereum and Terra, is rumored to launch a stablecoin called USN, which will also reportedly offer a decentralized financial protocol capable of providing users with users a 20% annual percentage yield (APY) on their USN deposits.

This is similar to the Anchor protocol of the Terra ecosystem which currently offers users 19.49% APY on UST deposits.

in a substack mail Detailing what he understands of the plans, Crypto Insiders Telegram group founder Zoran Kole argued that Near Protocol was superior to both Etheruem and Terra, offering data from Electric Capital that described Near Protocol's substantial growth in terms of development. .

Kole concluded that the growth of Near's network combined with its soon-to-launch stablecoin USN and subsequent DeFi protocols could eventually allow Near Protocol with a market cap of $11.7 billion to catch up with and eventually eclipse Terra, which has a market capitalization of $37.2 billion.

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