Terra Builds up its Reserves with $200M Worth of AVAX

Terra Builds up its Reserves with $200M Worth of AVAX

The blockchain payment network has opted to purchase Avalanche, making it the 2nd most valuable asset in Terra’s UST reserve.

AVAX has been frequently named the "Ethereum Killer" for its supposed superior scalability, faster transaction speed, and an environment compatible with Ethereum smart contracts. However, it isn’t as popular as the Ethereum network, so it is unclear whether it would be fully functional performance-wise if it was under heavy load.

In any case, Terraform Labs and the Luna Foundation Guard have decided to "diversify" the network’s strategy and acquire almost a quarter of a billion worth of Avalanche (AVAX) tokens instead of Bitcoin.

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Based on the official report by Bloomberg, the decision behind the purchase was made supposedly because of AVAX’s immense growth over the past several months, and support from the community, which makes it a huge driving force in the crypto market.

The Lunda Foundation Guard, which is responsible for backing Terra’s stablecoin USDT by building up the treasury reserves, acquired $100M in AVAX by swapping it for Terra’s native token LUNA. The other half of $100M worth of AVAX was directly purchased from the Avalanche Foundation with UST.

In fact, the Founder of Terraform Labs Do Kwon slightly undermined Ethereum in comparison to Avalanche, stating:

"Avalanche is still a growing ecosystem…a lot of it is fueled by loyalty to the AVAX token and users feel a lot of affinity with an asset that aligns itself with AVAX. Whereas for the average Ethereum user, aligning yourself with Ether doesn’t really mean that much."

With the acquisition, according to the post, users will be able to swap UST for AVAX on Avalanche’s platform, and, subsequently, several dApps on the Terra Network will become compatible with Avalanche.

Avalanche has been at the forefront of some of the most prominent cryptocurrencies in recent times. Back in March, the Avalanche Foundation announced its $290M incentive program to accelerate its subnet development.

Dom Z. - Crypto Analyst

by Dom Z. - Crypto Analyst, BitDegree