Macauley Peterson

<div id="highlights-block_627aaac6c2724" class="highlights">
 <ul>
 <li>LFG has deployed its BTC reserves, but $1 billion in circulating supply contraction has so far failed to restore the dollar peg as UST trades around 90 cents</li>
 <li>Critics have long worried about the viability of an undercollateralized stablecoin</li>
 </ul>
 
</div>



Retail users who have relied upon Terra’s Anchor Protocol as a safe, high-yield savings account are waking up to an unpleasant new reality.&nbsp;



Terra USD (UST) has been trading well below its dollar peg since Saturday, but <a href="https://cms.blockworks.co/luna-foundation-guard-to-support-struggling-ust-peg-with-btc-reserves/" target="_blank" rel="noreferrer noopener">the initial drop</a> to 98 cents proved to be a prelude to a much greater fall. It has even attracted the attention of US Treasury Secretary Janet Yellen, who cited UST by name <a href="https://cms.blockworks.co/secretary-yellen-stablecoins-pose-significant-risk-to-financial-stability/" target="_blank" rel="noreferrer noopener">in Congressional testimony</a> today.



As Do Kwon’s Terraform Labs and the Luna Foundation Guard work to restore regularly scheduled programming, the questions on everyone’s mind: Can the project be saved? And how?



The formerly-stable coin slid to just under 70 cents at one point in the past 24 hours, <a href="https://www.coingecko.com/en/coins/terra-usd" target="_blank" rel="noreferrer noopener">according to CoinGecko</a>. This prolonged de-peg has led to mass withdrawals from the preeminent Terra blockchain dApp Anchor, which has seen its deposits plunge by some $7.8 billion.



The net UST supply contraction amounts to roughly $1 billion already. As each UST is redeemed for $1 worth of LUNA, the latter’s supply expands. Since the trouble began May 7, around 25 million LUNA <a href="https://terra.smartstake.io/history" target="_blank" rel="noreferrer noopener">have been minted</a> by the protocol.&nbsp;



The increased supply has decimated the price of Terra’s native asset, which has fallen by 64% over the past week, according to <a href="https://cms.blockworks.co/prices/" target="_blank" rel="noreferrer noopener">data compiled by Blockworks</a>.



On Tuesday, Terra mastermind Do Kwon again sought to quell concern via Twitter, postulating an imminent — though unspecified — recovery plan.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Close to announcing a recovery plan for <a href="https://twitter.com/search?q=%24UST&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$UST</a>. Hang tight.&mdash; Do Kwon 🌕 (@stablekwon) <a href="https://twitter.com/stablekwon/status/1524049689510694916?ref_src=twsrc%5Etfw">May 10, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



<h3 class="wp-block-heading">Monday madness</h3>



After dipping to 92 cents at 2:30 pm ET on Monday, UST appeared to stabilize over the next few hours, but conditions deteriorated rapidly beginning at around 6:15 pm, as UST began a relentless two-hour slide to a nadir of about 65 cents.



Unlike the weekend price action, which was centered on UST trading via centralized exchanges and the Ethereum dex Curve, the extreme volatility this time knocked UST off peg on the Terra chain itself. The speed of the descent overwhelmed the intended arbitrage-based stabilization mechanism built into the protocol design, which has a roughly <a href="https://station.terra.money/proposal/1164">$293 million per day soft cap</a> for redemptions at $1.&nbsp;



Exceed the cap, and the spread — the amount of LUNA that one UST can be redeemed for — is designed to widen. The concept is supposed to prevent manipulation of the mechanism, but it also makes it a slow slog to recover from such a strong shock.



A proposal is currently up for a vote by LUNA holders to effectively increase the cap to $1.2 billion, to allow LUNA to absorb the supply of UST and eventually restore the peg.



Algorithmic stablecoins remain <a href="http://www.wakeforestlawreview.com/2021/10/built-to-fail-the-inherent-fragility-of-algorithmic-stablecoins/" target="_blank" rel="noreferrer noopener">highly experimental</a> and have <a href="https://cms.blockworks.co/algorithmic-stablecoin-developer-sam-kazemian-calls-for-caution-on-regulation/" target="_blank" rel="noreferrer noopener">failed spectacularly</a> before. Most recently, the Waves-based stablecoin USDN <a href="https://cms.blockworks.co/algorithmic-stablecoin-usdn-is-on-the-brink-of-failure/" target="_blank" rel="noreferrer noopener">collapsed to 77 cents</a> in early April and has never fully recovered. It used a roughly similar burn and mint stabilization mechanism to UST’s, and the platform’s WAVES token has <a href="https://www.coingecko.com/en/coins/waves" target="_blank" rel="noreferrer noopener">fallen by 80%</a> since.



UST itself suffered <a href="https://twitter.com/terra_money/status/1397397011603808256" target="_blank" rel="noreferrer noopener">a similar volatility-induced crash</a> in May 2021, when it briefly hit 96 cents. But on a 1-year chart, that now appears as a minor bump in the road.



<figure class="wp-block-image"><img decoding="async" src="https://lh4.googleusercontent.com/MDm7J_NnpgOmDGPrmPFAFVKPDrhG6p0XOBzu6a3xqNy2_VkDSMjYCbjiDzHyYeUgpR_jk0J_ZTnZEAUd2lW2uk9iC6h8BqwXyp95jMVo0rz6YrB4bfSyVg-K0MXyjt4_jwzGjBJkKMEVQj-ZDQ" alt=""/><figcaption>UST over the past year; Source: CoinGecko</figcaption></figure>



Many members of the Luna community, who call themselves “lunatics,” have <a href="https://twitter.com/SmartStake/status/1523844614314147843" target="_blank" rel="noreferrer noopener">expressed support</a> for the protocol and its backers, even in difficult times. But for some, irrespective of whether the peg ultimately recovers, it has been a catastrophic loss.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Heard about a friend of a friend who took his life after losing family savings on Anchor last night. This market is now extremely predatory and it&#39;s a good time to reassess whether you want to play the game or not. Good time to check on friends too 🧡&mdash; Awawat (@Awawat_Trades) <a href="https://twitter.com/Awawat_Trades/status/1523892406130671616?ref_src=twsrc%5Etfw">May 10, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Hey <a href="https://twitter.com/search?q=%24LUNA&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$LUNA</a> <a href="https://twitter.com/search?q=%24UST&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$UST</a> holders &#8211; if anyone is struggling mentally and u need someone to chat with, I’m gonna be around my DMs for the next 2-3 hours to talk to anyone who needs an ear. Seriously.. money isn’t all we make it out to be. U matter and I wanna chat if u need it&mdash; DePhi Alpha 🌔 (@whooome4) <a href="https://twitter.com/whooome4/status/1523897367535230980?ref_src=twsrc%5Etfw">May 10, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The instability comes as no shock to crypto veterans, according to Mark Richardson, head of research at Bancor, a decentralized exchange and liquidity protocol.



“If you ask anyone from around the industry whether or not this is a surprise at all, everyone will tell you that they’re surprised this didn’t happen sooner,” Richardson told Blockworks.



This story was updated on May 11, 2022 at 6:20 am ET.



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Cryptocurrency Luna Lurches as Terra USD Volatility Continues, Erasing Billions

<div id="highlights-block_62794b4f4b991" class="highlights">
 <ul>
 <li>High-volumes sales of UST have pushed the stablecoin below peg for several hours</li>
 <li>The LFG will loan $750 million from its BTC reserves to market makers for stability operations</li>
 </ul>
 
</div>



Stablecoins pegged to the US dollar have just one job: hew as closely as possible to $1.



Any meaningful deviation from the one-to-one peg threatens to undermine the confidence of stablecoin holders.&nbsp;



That was the case with Terra’s UST stablecoin over the weekend, as it experienced its most significant stability test since May 2021, briefly dropping to around 98 cents on major decentralized exchange Curve Finance. Today, the Luna Foundation Guard (LFG) — tasked with defending the peg and armed with $2.6 billion in bitcoin — is manning the ramparts.



UST is an algorithmic stablecoin whose supply expands by burning LUNA, the native asset of Terra. As demand for UST pushes the price above a dollar, LUNA is burned to mint more, restoring the peg. Over the past 6 months, the market cap of UST has skyrocketed from just under $3 billion to more than $18 billion.



When the market cap of UST grows, the supply of LUNA shrinks, which puts upward pressure on LUNA’s price. But the reverse is also true — when the UST supply contracts and the price drops below a dollar, LUNA is minted and sold to restore equilibrium.



Trouble began for UST after an <a href="https://terrasco.pe/mainnet/address/terra1yl8l5dzz4jhnzzh6jxq6pdezd2z4qgmgrdt82k" target="_blank" rel="noreferrer noopener">$85 million transfer</a>, coming from the Terra blockchain through the <a href="https://www.portalbridge.com/#/transfer" target="_blank" rel="noreferrer noopener">Wormhole bridge</a> to Ethereum, was <a href="https://twitter.com/CurveSwaps/status/1523059517486891008?s=20&amp;t=OvV3UWv23aNN6GAI03d0vg" target="_blank" rel="noreferrer noopener">quickly sold on Curve</a> on May 7. Another $108 million in UST from the same Terra address was sent to the Binance exchange and sold.&nbsp;



Although the market arbitrage mechanisms built into the protocol are working as intended, such large transactions pushed the price on those exchanges markedly off peg.



&#8220;As bid-side liquidity for UST on third-party market venues thins out, peg dislocations can occur until the open arbitrage loop is closed, which can take some time for inflows of bid-side liquidity to increase,&#8221; a Teraform Labs (TFL) representative told Blockworks. &#8220;This can depend on several factors, including expected profits from the open arbitrage trade, liquidity constraints, long-term demand for LUNA staking cash flow from Terra network activity, and other factors.&#8221;



The loss of peg led major accounts to begin <a href="https://twitter.com/pedroexplore1/status/1523232362565627906?s=20&amp;t=eQdUFOsOBjtfFPYKcmx1aA" target="_blank" rel="noreferrer noopener">withdrawing UST</a> from lending- and borrowing-dApp <a href="https://app.anchorprotocol.com/" target="_blank" rel="noreferrer noopener">Anchor Protocol</a> by the millions.



Anchor offers a subsidized yield, that for most of its history was 20% APR, but was recently lowered to 18%. The vast majority of UST is deposited there. Since the UST peg started to wobble, Anchor’s deposits have fallen by almost a quarter: Around $3.5 billion has been withdrawn.



<figure class="wp-block-image"><img decoding="async" src="https://lh4.googleusercontent.com/AoyqBvy2PV2iu5Y3e7jMfbeX0hNr6704ph3tjWBPWnti7Df_OnDdloBqjCVA2CV7MPwoDpANmS9ekovmVAenskjso0Nh276mpNqS9JOWqEzCELyqg4CFROX1SOFvUEeQbVdGfYsv4WD4LA_EyA" alt=""/><figcaption>Source: <a href="http://app.anchorprotocol.com/">Anchor Protocol dashboard</a> as of 11:10 am ET</figcaption></figure>



After a couple of tense hours, TFL’s Do Kwon <a href="https://twitter.com/stablekwon/status/1523177914077917184" target="_blank" rel="noreferrer noopener">took to Twitter</a> in a bid to calm markets.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">I’m up &#8211; amusing morning Anon, you could listen to CT influensooors about UST depegging for the 69th time Or you could remember they’re all now poor, and go for a run instead Wyd&mdash; Do Kwon 🌕 (@stablekwon) <a href="https://twitter.com/stablekwon/status/1523075465384136704?ref_src=twsrc%5Etfw">May 7, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



In a follow-up, he waxed philosophical, expressing confidence in the stablecoin’s, well, stability.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“Those of you waiting for the earth to become unstable — I&#8217;m afraid you will be waiting until the age of men expires, cities have returned to the dust, oceans have gone bone dry, the map of continents have been drawn anew, and dinosaurs once again roam the earth.”</blockquote>



A large market operator began selling ether en masse to rebalance the UST Curve pool and support the price.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">This address is swapping 1,000 ETH to USDT to UST every few minutes. ~30,000 swapped. Plus a 20,000 ETH transfer to Binance.<a href="https://t.co/BCcJiuKiHH">https://t.co/BCcJiuKiHH</a>&mdash; mhonkasalo (@mhonkasalo) <a href="https://twitter.com/mhonkasalo/status/1523137936119582721?ref_src=twsrc%5Etfw">May 8, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



It’s unclear who caused the initial mass selling of UST, or who stepped in to support the price — the LFG declined to comment on speculation as to the owner or owners of the active wallets. Critics have long argued that the available liquidity on exchanges is insufficient to support large-scale efforts to exchange UST for alternative stablecoins or fiat currency.



Do Kwon <a href="https://twitter.com/FreddieRaynolds/status/1523148819361595392?s=20&amp;t=IVwIzt33wnKqiRD8oCToIQ" target="_blank" rel="noreferrer noopener">initially blamed</a> a single bad actor in a since-deleted tweet that misrepresented the percentage of users responsible for Anchor withdrawals.



Caetano Manfrini, an attorney for Brazil-based GEMMA Ecosystem, told Blockworks he believed the sequence of events were well timed.



“I don&#8217;t know if all these steps were orchestrated, but it seems to me that someone was waiting for a window of opportunity (BTC crash), in the middle of Saturday night…Opportunists [have been] common in the market since our existence,” Manfrini said. “If it happened once, it will happen again.”



<h3 class="wp-block-heading">Luna Foundation Guard deploys reserves</h3>



In an attempt to restore confidence, the LFG announced Monday it would loan $750 million in bitcoin and an equal amount of UST to a professional market maker to facilitate the arbitrage operations needed to maintain the dollar peg.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">3/ Per the LFG’s mandate, the LFG will proactively defend the stability of the <a href="https://twitter.com/search?q=%24UST&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$UST</a> peg &amp; broader Terra economy, especially under volatility and the uncertainty of macro conditions in legacy markets.&mdash; LFG | Luna Foundation Guard (@LFG_org) <a href="https://twitter.com/LFG_org/status/1523512199859171329?ref_src=twsrc%5Etfw">May 9, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



As of noon ET Monday, that bitcoin had yet to be deployed, <a href="https://datastudio.google.com/u/0/reporting/b31cc9e5-c54c-4418-a6ce-b332c57e82e9/page/4YBqC?s=or-T7NeGLew" target="_blank" rel="noreferrer noopener">according to the LFG Reserves dashboard</a>. Eventually, the reserves are expected to backstop the peg through an automatic redemption feature.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">&#8220;The BTC Reserve Pool <a href="https://agora.terra.money/t/bitcoin-reserve-pool/5259" target="_blank" rel="noreferrer noopener">proposed by Jump</a> would (once deployed on-chain) kick in at a trigger price of roughly 200 BPs below the $1 peg mark as a price floor for the UST peg with billions in BTC liquidity to support UST in such an instance,&#8221; the TFL representative told Blockworks.&nbsp;</blockquote>



Meanwhile, the price of one UST has been trading dangerously low again, dipping to below 70 cents on major exchanges as of 8:15 pm ET, as UST continues to flow out of Anchor Protocol at a rapid rate.



This is a developing story.



This story was updated on May 9, 2022, at 2:27 pm ET, with comments from TFL.



This story was updated on May 10, 2022, at 6:00 am ET.



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Luna Foundation Guard To Support Struggling UST Peg With BTC Reserves

Casey Wagner

<div id="highlights-block_627553708c66c" class="highlights">
 <ul>
 <li>Do Kwon wants UST reserves to hit $10 billion in bitcoin</li>
 <li>LFG partnered with Genesis Trading and Three Arrows Capital to complete the purchase</li>
 </ul>
 
</div>



With help from Genesis Trading and Three Arrows Capital, the Luna Foundation Guard (LFG) has added $1.5 billion in bitcoin to its UST stablecoin reserves.&nbsp;



LFG, the nonprofit organization built to support Terra, announced Thursday that it had closed a $1 billion over the counter swap of UST for bitcoin led by digital asset prime broker, Genesis. The average price of the purchases has not been disclosed.



LFG purchased $500 million worth of bitcoin via crypto hedge fund Three Arrows Capital, making the total purchases by the LFG $1.5 billion in bitcoin.



“The LFG’s mission to support the stability and adoption of the UST stablecoin continues with the latest deal acquiring BTC from Genesis for the UST Forex Reserve,” Do Kwon, LFG governing council member and co-founder and CEO of Terraform Labs, said in a <a href="http://www.prweb.com/releases/lfg_closes_1_5_billion_otc_deal_of_ust_for_btc_with_genesis_and_three_arrows_capital_3ac_for_the_ust_forex_reserve/prweb18654486.htm" target="_blank" rel="noreferrer noopener">statement</a>. “As the leading broker in digital currencies, Genesis’ participation displays the growing demand for decentralized stablecoins in the broader crypto market, helping to build bridges across crypto communities tied together by a common decentralized money.”



The purchase brings LFG’s bitcoin holdings to around $3 billion. Kwon has said that he hopes to eventually acquire $10 billion in bitcoin reserves.&nbsp;



“LFG has announced they intend to continue to acquire BTC as the preferred long-term stabilizing asset for UST,” Jordi Alexander, chief investment officer at Selini Capital, and a noted <a href="https://youtu.be/6eOU5OaKd8s?t=476" target="_blank" rel="noreferrer noopener">Terra skeptic</a>, said.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“While there may now be a temporary pause on their purchases, if UST issuance continues to go up in the future, it would not be surprising to see them start buying again to move towards their intermediate target of $10 billion in bitcoin.”</blockquote>



The announcement comes less than a month after <a href="https://cms.blockworks.co/lfg-to-acquire-100-million-in-avax-to-build-reserves/" target="_blank" rel="noreferrer noopener">LFG acquired $100 million</a> of the Avalanche Foundation’s native token AVAX to build UST reserves. Industry members were not surprised by the choice, given that a $100 million swap is close to 0.5% of AVAX’s market cap, making it a good opportunity to bring new fans and users to UST.



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LFG Adds $1.5 Billion in Bitcoin to UST Reserves

<div id="highlights-block_624f5b7ecc240" class="highlights">
 <ul>
 <li>“The stablecoin landscape is less developed in Avalanche, and so this is a way to further position UST as the stablecoin of choice,” Santiago Santos said</li>
 <li>On Wednesday, Terraform CEO Do Kwon confirmed LFG purchased an additional $231 million bitcoin</li>
 </ul>
 
</div>



The Luna Foundation Guard (LFG) has acquired $100 million of the Avalanche Foundation’s native token AVAX to build the reserves of its stablecoin UST.



LFG, the nonprofit organization built to support Terra, has a long-term goal of acquiring $10 billion in bitcoin for UST reserves. On Wednesday, Terraform Labs CEO Do Kwon confirmed that LFG had purchased an additional $231 million bitcoin, bringing its total holdings to more than $2 billion.&nbsp;



LFG’s decision to hold reserves in AVAX versus ethereum or another DeFi token may sound surprising, but industry members say the Avalanche community is a major draw.&nbsp;



“I think they choose AVAX because that token exchange makes a dent into that ecosystem and can win over the native AVAX users,” Jordi Alexander, chief investment officer at Selini Capital, said. “AVAX market cap is 18 times smaller than Eth, so it is a meaningful partnership.”&nbsp;



A $100 million swap is close to 0.5% of AVAX’s market cap, whereas an ethereum purchase of the same amount would hardly make a dent, Alexander said, making it a good opportunity to bring new fans and users to UST.



“The stablecoin landscape is less developed in Avalanche, and so this is a way to further position UST as the stablecoin of choice,” said Santiago Santos, angel investor and co-host of Blockworks’ <a href="https://cms.blockworks.co/podcasts/empire/" target="_blank" rel="noreferrer noopener">Empire</a> podcast. “Ethereum is a more saturated ecosystem.”



“They are already on AVAX with Anchor, so it is a logical next step to solidify that support from a place of strength,” Alexander added, referring to the Anchor Protocol, which is native to Terra and will be launching a native version on Avalanche as part of the partnership. 



Kwon agreed that the community aspect of Avalanche and users’ loyalty to AVAX played a role in the decision, he told <a href="https://www.bloomberg.com/news/articles/2022-04-07/terra-expands-stablecoin-reserve-beyond-bitcoin-with-avalanche" target="_blank" rel="noreferrer noopener">Bloomberg</a>.



Luna&#8217;s acquisition of $100 million in AVAX is only the beginning of UST&#8217;s adoption among Avalanche DeFi applications, Ava Labs CEO Emin Gun Sirer said in a <a href="https://www.prweb.com/releases/lfg_to_acquire_100m_in_avax_to_strategically_align_terra_and_avalanche_ecosystems/prweb18577009.htm" target="_blank" rel="noreferrer noopener">statement</a>.



In March, Ava Labs, the team behind the Avalanche blockchain, <a href="https://medium.com/avalancheavax/avalanche-foundation-launches-multiverse-an-up-to-290m-incentive-program-to-accelerate-growth-of-c815ac5692c7" target="_blank" rel="noreferrer noopener">announced a partnership</a> with Aave, GoldenTree Asset Management, Valkyrie Funds, Wintermute, Jump Crypto and Securitize to build the first KYC-compliant, horizontally-integrated blockchain engineered for institutional DeFi. 



The team also unveiled the Avalanche Multiverse, an up-to-$290 million program to encourage growth of its subnet capabilities, which serves to validate blockchains and enable scalable, app-specific networks.&nbsp;



“With Ava Labs&#8217; recent partnership…UST stands to benefit from this venture,” Spencer Hughes, research analyst at Blockworks, said. “Sirer also mentioned that Luna and Ava Labs will collaborate to launch a gaming subnet, which provides an independent, scalable application network for users.&#8221;



There is speculation that AVAX, although widely supported by its community, may not be as safe as a reserve currency choice as ethereum.&nbsp;



“I would be concerned if AVAX became a very big percentage of reserves, but my view is that diversifying the reserve base is marginally beneficial,” Santos said. “That said, everything in crypto is still very correlated. The problem is you can&#8217;t go to seizable assets, which limits the possibilities.”&nbsp;



Santos said he wouldn&#8217;t be surprised if LFG opts to add ether and other assets to reserves in the future.



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LFG To Acquire $100 Million in Avax To Build Reserves

Jacquelyn Melinek

<div id="highlights-block_621907007df90" class="highlights">
 <ul>
 <li>Luna Foundation Guard raised $1 billion in a private token sale, while Amber Group closed a $200 million extended Series B round</li>
 <li>Amid the massive rounds, there were more modest raises too, including a $33 million Series B for InfStones and a $34 million raise for Aligned</li>
 </ul>
 
</div>



As February comes to an end, cryptocurrencies are showing signs of recovery and capital is continuing to roll into crypto.



Over the past 24 hours, the cryptocurrency market was up 9.7%, according to <a href="https://cms.blockworks.co/prices/" target="_blank" rel="noreferrer noopener">prices</a>. The two largest cryptocurrencies by market capitalization, bitcoin and ethereum, were up 9.9% and 11.35%, respectively, as of 9:45 am ET Friday.



Over $1.3 billion in investments poured into the crypto sector this week. This is in part due to some major funding rounds including Luna Foundation Guard’s <a href="https://cms.blockworks.co/nonprofit-raises-1b-to-create-bitcoin-reserve-support-terra-ecosystem-growth/" target="_blank" rel="noreferrer noopener">$1 billion</a> private token sale, which is one of the largest raises in the crypto sector, and Amber Group’s <a href="https://cms.blockworks.co/crypto-trading-platform-amber-group-eclipses-3b-valuation-with-latest-raise/" target="_blank" rel="noreferrer noopener">$200 million</a> extended Series B round.



Amid the massive rounds, there were low to multi-million dollar raises, too, including a <a href="https://cms.blockworks.co/blockchain-infrastructure-provider-infstones-closes-33m-series-b/" target="_blank" rel="noreferrer noopener">$33 million Series B</a> closed by blockchain infrastructure provider InfStones and a <a href="https://cms.blockworks.co/aligned-raises-34m-to-grow-defi-and-web3-infrastructure/" target="_blank" rel="noreferrer noopener">$34 million</a> raise by a DeFi and Web3 infrastructure platform Aligned.&nbsp;



Total value locked on DeFi (decentralized finance) protocols has surged in the past 12 months, from $52 billion to $196 billion, according to <a href="https://defillama.com/" target="_blank" rel="noreferrer noopener">data</a> from DeFi Llama. With that hike in TVL, demand has also increased for the sector, Aligned founder Sam Cassatt told Blockworks on Thursday.



“Demand will continue to grow,” Cassatt said. “I don’t see this slowing down, it’s getting larger day by day.”&nbsp;



Web3 and DeFi dominated the emerging technology investment landscape in Q4 2021, with $2.4 billion invested across 26 deals during that time frame, according to a PitchBook report on Thursday. The two sectors accounted for about 13%, or $4.3 billion of the <a href="https://cms.blockworks.co/report-vcs-invested-33b-in-crypto-and-blockchain-startups-in-2021/" target="_blank" rel="noreferrer noopener">$33 billion</a>, invested capital in crypto last year.



Other notable capital raises this week include:&nbsp;



<ul class="wp-block-list"><li>DeFi protocol Teller served up a <a href="https://www.yahoo.com/now/teller-closes-6-85m-strategic-170000480.html" target="_blank" rel="noreferrer noopener">$6.85 million</a> strategic raise</li><li>Blockchain-based game Cradles closed a <a href="https://www.yahoo.com/lifestyle/cradles-closes-5-million-private-140000428.html#:~:text=GEORGE%20TOWN%2C%20Cayman%20Islands%2C%20Feb,round%20led%20by%20Animoca%20Brands." target="_blank" rel="noreferrer noopener">$5 million</a> private round led by Animoca Brands</li><li>DeFi app Catalog logged $7.5 million to help create a cross-chain and multichain future</li><li>Emerging Web3 startup Fast Break Labs filled a <a href="https://www.prnewswire.com/news-releases/fast-break-labs-announces-6-million-seed-round-co-led-by-patron-and-pantera-capital-301488191.html" target="_blank" rel="noreferrer noopener">$6M seed round</a> led by Patron and Pantera Capital&nbsp;</li><li>Binance-backed fantasy strategy game Heroes of Mavia roped in $2.5 million, led by Crypto.com Capital.</li></ul>



Check back next week for more funding news.



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Funding Roundup: Major Raises of $1B and $200M Join Startup Spree

<div id="highlights-block_621548b0ac951" class="highlights">
 <ul>
 <li>This is one of the largest capital raises to date in the crypto industry, next to NYDIG’s $1 billion funding round in December 2021</li>
 <li>“[It’s] $1B to absorb liquidity crunches,” Kanav Kariya, president of Jump Crypto, tweeted</li>
 </ul>
 
</div>



A nonprofit working to scale the ecosystem of the Terra blockchain has raised $1 billion in a private token sale.



With the funding, the Luna Foundation Guard (LFG) plans to establish a bitcoin reserve for Terra’s UST stablecoin.



“The UST Forex Reserve is an initiative to provide a further layer of support using assets that are considered less correlated to the Terra ecosystem, initially with Bitcoin but with plans to expand to other major non-correlated assets within the market moving forward,” the foundation said in a statement.



Jump Crypto and Three Arrows Capital led the token sale, with participation from DeFiance Capital, GSR, Republic Capital, Tribe Capital and others.



The raise is one of the largest to date in crypto, next to <a href="https://cms.blockworks.co/nydig-closes-1b-funding-round-raising-valuation-above-7b/" target="_blank" rel="noreferrer noopener">NYDIG’s $1 billion</a> funding round, which raised its valuation above $7 billion in December.



Terra, a fast-growing blockchain, now supports more than <a href="https://www.terra.money/ecosystem" target="_blank" rel="noreferrer noopener">70 projects</a>.



As an algorithmic stablecoin, UST is pegged to a series of financial aspects within the Terra protocol, which leads to moves above or below $1. LUNA — Terra’s reserve, staking and governance asset — retains an elastic supply to help neutralize market pressures.



“[It’s] $1B to absorb liquidity crunches,” Kanav Kariya, president of Jump Crypto, <a href="https://twitter.com/KariyaKanav/status/1496194701048877059?s=20&amp;t=XGC5LUVfS5bwwoApwPFiIQ" target="_blank" rel="noreferrer noopener">tweeted</a>. “All contractions in the economy have caused reflexive movement (by design). Allowing for a big chunk of withdrawals in [a] short span through different means can be really impactful.”



The token sale will capitalize initially on its UST Forex Reserve, with investor purchases locked up over a four-year vesting period.



Additional details on the reserve’s function will be released in coming weeks, the foundation said. LFG was not available for additional comment.



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.