SoKor Firm's Vow To Amass $10B Worth Of Bitcoin Fires Up Market

A crypto platform's pledge to amass $10 billion worth of bitcoin to back its own "stablecoin" is firing up the market. It's part of a wider movement to crown bitcoin as the reserve currency of a new age, Lisa Pauline Mattackal and Medha Singh reported for Reuters late on April 12, 2022.

Photo Insert: Seoul-based Terraform Labs has so far built up nearly 40,000 bitcoin worth $1.7 billion in a series of purchases.

Seoul-based Terraform Labs has so far built up nearly 40,000 bitcoin worth $1.7 billion in a series of purchases via a non-profit affiliate, Luna Foundation Guard, according to publicly available blockchain data.

The spree follows Terraform co-founder Do Kwon's announcement on Twitter last month that the project would buy the $10 billion worth of bitcoin reserves to underpin TerraUSD, breaking ranks with other large stablecoins - a ballooning class of cryptocurrencies that aim to minimize wild price swings and are typically backed by US dollar reserves.

A stablecoin backed by bitcoin reserves, according to Kwon, "will open a new monetary era of the Bitcoin standard," referencing the gold standard that formed the backbone of global finance about a century ago.

The acquisitions, and the anticipation of more to come, are supporting the price of bitcoin, with some market players identifying them as a big driver of bitcoin's climb back towards $48,000 at the end of March. More significant, perhaps, is whether others will follow Terraform's lead.

"Buying $10 billion worth can move the price in the short term," said Sid Powell, CEO of Sydney-based crypto lender Maple Finance. "But over the longer period, it's more what it signals - that bitcoin has been introduced as the hottest form of collateral backing for currencies."

Yet, other market participants cautioned that an ever-closer embrace between bitcoin and stablecoins like TerraUSD could introduce a new risk for crypto markets that raised the prospect of a "death spiral" for investors down the line.

"There is a danger some people are trying to position long ahead of the buying which could exaggerate a fall if the price starts to retrace," said Richard Usher, head of OTC trading at crypto firm BCB Group in London, who attributed bitcoin's gains last month to an improving risk environment.

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