Avalanche Foundation To Work With LFG To Help Sell Reserve Without Hurting AVAX

Avalanche Foundation, a non-profit fund for the Avalanche blockchain, took to Twitter to post a transparency report regarding the AVAX tokens that were purchased by Luna Foundation Guard (LFG) and Terraform Labs (TFL).

LFG, the firm responsible for the development of the Terra ecosystem, had purchased $100 million in AVAX for the TerraUSD or UST reserve, as per a Twitter post from April 7. As a reserve asset, the AVAX holdings were supposed to help re-peg the UST stablecoin to $1 in case of a crash.

Along with LFG's $1.97 million AVAX, TFL purchased 1.09 million AVAX with a one-year lockup period. The amount purchased by LFG represented 0.9% of the past week’s AVAX volume while TFL's purchase represented 0.5% of the same, confirmed Avalanche's official Twitter account.

Avalanche confirmed that the AVAX tokens in the LFG reserve are currently "immobilized" and if LFG wants to sell them, "the Avalanche Foundation is ready to work with LFG on a sensible trading strategy," it said in another Twitter post.

The idea is to make sure any potential sale by LFG or TFL doesn't depress AVAX price and further strain an already stressed crypto market. When LFG sold a part of its Bitcoin (BTC) holdings in the past few days, investors saw Bitcoin drop below $30,000. Avalanche Foundation aims to prevent a similar situation amid a bearish market.

Along with AVAX, LFG had also purchased Bitcoin (BTC) aggressively to back UST's reserve. LFG confirmed in a Twitter post that as of May 7 the non-profit firm had the following cryptocurrencies in its reserve:

• 80,394 BTC
• 39,914 BNB
• 26,281,671 USDT
• 23,555,590 USDC
• 1,973,554 AVAX
• 697,344 UST
• 1,691,261 LUNA

LFG directly sold 26,281,671 USDT and 23,555,590 USDC for an aggregate 50,200,071 UST and transferred 52,189 BTC to trade with a counterparty, net of an excess of 5,313 BTC that they have returned, for an aggregate 1,515,689,462 UST. Additionally, LFG also sold 33,206 BTC for an aggregate 1,164,018,521 UST.

As of May 16, 2022, LFG's reserve consist of the following assets:

• 313 BTC
• 39,914 BNB
• 1,973,554 AVAX
• 1,847,079,725 UST
• 222,713,007 LUNA

The remaining assets will be used to compensate the remaining users of UST, starting with the small holders.

Interestingly, the crypto community believes that the crash of UST and LUNA was an inside job that allowed some Terra operators to secretly bail out some whales while the small investors got crushed. As a result, Do Kwon, the creator of Terra, has been sued by South Korean investors.