Over the past few months, the Luna Foundation Guard (LFG), a nonprofit organization created to support Terra, has aggressively accumulated $1.63 billion in BTC.
According to Terra founder Do Kwon, the massive BTC purchases are designed to support Terra’s own stablecoin, whose exchange rate is pegged to the U.S. dollar (UST).
Based on this, the macro strategist concluded that a sharp decline in LUNA’s valuation could force LFG to use its bitcoin reserves to maintain UST stability.
If Luna has the same price decline as Fantom (FTM) or some other affected cryptocurrencies, the UST peg would be in jeopardy.
In this situation, LFG would sell bitcoin reserves in an already weak market. Such an event could mean a capitulation of the cycle.
Alden also points to risks in which bearish market conditions force UST holders to convert Stablecoin into LUNA or BTC to cash out later.
The macro analyst mentioned another risk associated with the Anchor Protocol (ANC) savings and lending platform, built on the Terra blockchain, which allows users to earn up to 19.5% annual percentage yield (APY).
In his opinion, the high APY Anchor Protocol is a double-edged sword, as it both creates demand for UST and is a time bomb that could explode.