Do Kwon, the co-founder of the Terra network, recently proposed the creation of a completely new chain with a new LUNA token. This proposal has received support from 79% of the votes, but there is still a pending question of how the project will utilize the remaining tokens in its treasury.
Terra fails to give a plan for AVAX reserves
Avalanche posted a tweet saying that the Luna Foundation Guard had “disclosed no plans” for the 2 million AVAX tokens in its treasury. The LFG has around $60 million worth of AVAX tokens in treasury, which is the second-largest holding in LFG’s entire $240 million treasury.
“Given the proposed Terra chain fork, LFG has disclosed no plans to use the AVAX. Should any sales be contemplated for the LFG reserves, the Avalanche Foundation is ready to work with LFG on a sensible trading strategy,” the tweet by Avalanche read.
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AVAX also added that it was requesting disclosure because some members of the AVAX community had inquired about details of this reserve and how it would be used. The crypto community has been curious about what would happen to AVAX tokens and whether there would be any notable impact from the sale of these tokens.
Relationship between Terra and Avalanche
Projects that had a close relationship with the Terra network have faced questions from their communities about the effects caused by the collapse of the Terra ecosystem. Besides the $60M worth of AVAX in the LFG treasury, Terraform Labs also holds another 1.1 million AVAX tokens that will be unlocked in a year.
In April, it was reported that the Luna Foundation Guard and Terraform Labs had engaged in a sort of partnership with the Avalanche Foundation. The LFG and Terraform Labs acquired $200M worth of AVAX tokens from the Avalanche Foundation. The Avalanche Foundation was issued $100 million worth of LUNA by Terraform Labs and $100 million worth of UST from the LFG.
While the exchange was done on a 1:1 ratio, the current market prices show that the UST and LUNA held by the Avalanche Foundation are worth very little. Both LUNA and UST have recorded notable declines in value. However, Avalanche has not addressed the value of the Terra-related tokens that they hold in their treasury. With LUNA dropping to $0 and UST failing to repeg, the Avalanche Foundation is definitely sitting on a loss.
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