Terra’s Founder Revealed What Can Happen To UST If BTC Crashes

Terra’s founder revealed what can happen to UST if the BTC price crashes while saying that he is betting on the long-term growth of Bitcoin’s price and isn’t really worried about short-term volatility so let’s read more in today’s latest Bitcoin news.

Terra’s founder revealed, that a crash in the price of BTC Will is negative for the stability of the UST stablecoin but he expects bitcoin to go up anyway. Terraform labs is the entity behind the Terra blockchain which plans on buying a total of $3 billion in BTC and back the UST stablecoin. Kwon made the comments in an interview on the Unchained podcast where host Laura Shin asked Kwon about the short-term implications of holding so much BTC and what it means for the stability of UST.

According to @stablekwon, @terra_money is a Layer 2 solution for BTC where “Bitcoin only needs to be good at being one thing, being an asset.” What do you think – will Terra be the layer 2 for bitcoin?

Episode link: https://t.co/T2nVfg7VyC pic.twitter.com/Thi9nVKUHv

— Laura Shin (@laurashin) March 31, 2022

He said that the worst case will be to continue buying Bitcoin and a crash happens a few months later while also being correlated with a massive fall in demand for UST which can be quite negative:

“I’m sort of betting that the long term scenario of Bitcoin going up and the reserves being strong enough to withstand UST demand drops is the more likely scenario.”

Kwon was buying BTC to hold in Terra’s treasury as 40% of the collateral for the US stablecoin and so far, Terra acquired 30727 BTC with most of them purchasing 2943 BTC in March, making Terra the third biggest single-wallet BTC holder. One crypto YouTuber argued that the addition of BTC to the treasury will help mitigate the impact of a reaction in UST demand and said that TErra’s move will help avert a death spiral due to the market uncertainty by helping the treasury swallow the supply of UST contraction.

One of Kwon’s goals for the treasury known as the Luna Foundation is to make the platform the biggest single wallet holder of BTC and in order to dethrone the leader, Michael Saylor’s Microstrategy, Kwon has to amass more than 125,051 BTC as per the BTC wallet tracker Bitcoin Treasuries. Later in the interview, Kwon lived up to his reputation and claimed that Terra is a Layer-2 solution for the BTC network and argued that with Terra, BTC has a bridge that connects it to a multitude of applications from DAOs to DEFI and NFT:

“And in terms of the expressivity, the transaction capabilities, the throughput, all those things can happen on Terra.”

Kwon’s comment drew the attention of the community and the ETH Developer “antiprosynthetis” responded by asking if all entities that use BTC to back their stablecoins should be considered as Layer 2 solutions and said:

“Even I don’t believe that Bitcoin’s standards have plummeted to such extent.”