Terra's Luna Pops With Its Billion-Dollar Headline
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Terra's Luna (CRYPTO: LUNA) popped on Wednesday after the creator, Terraform Labs, made a big announcement. It's raised $1 billion to buy Bitcoin (CRYPTO: BTC). The Bitcoin will be used to ensure Terra's stablecoin TerraUSD (CRYPTO: UST) will be able to endure some unforeseen outlier event. That's a lot to unpack, but this is good news for Luna's long-term adoption, which is why it's risen 9% over the previous 24 hours, according to CoinMarkCap.
Terraform Labs created an algorithmic stablecoin (a coin whose value is supposed to be pegged to the U.S. dollar) called TerraUSD. Unlike some other stablecoins, it's not backed by reserves. Rather, it exists in a symbiotic relationship with Luna. To briefly summarize, if TerraUSD's value deviates from a dollar, people can make money on an arbitrage opportunity by going back and forth from Luna to TerraUSD. But because of people exploiting the arbitrage opportunity, TerraUSD's supply is brought back in line with demand, maintaining its value at $1.
Image source: Getty Images.
Source Fool.com
