Following the recent fiasco, in which Terra and its two native cryptocurrencies plummeted in value, the organizations behind the project said they will seek outside help. One of the first legacy financial companies that stepped up to offer assistance is the Swiss asset manager – GAM Holding AG.
The official press release by the 40-year company reads that it has begun negotiations with Terraform Labs to “help support its Luna stablecoin (UST).”
GAM said it is “expected” to invest between $2 billion and $3 billion to “absorb excess supply of UST during its current selloff,” which should revive the UST peg to the US dollar.
“Our interest in supporting UST reflects our interest in supporting a vibrant, innovative, and resilient crypto market. We firmly believe in Terra’s ecosystem. Just as importantly, we believe in UST’s algorithmic approach to valuation. When investors have proper incentives, they naturally trade in ways that maintain price stability.” – commented GAM CEO Peter Sanderson.
CryptoPotato summarized the events of last week that brought not only Terra and its cryptocurrencies down but the entire market.
Due to the algorithmic nature of UST and its relation with LUNA, once the stablecoin started to lose its peg against the dollar, investors began taking advantage of the system by arbitraging it with LUNA.
This led to massive selling pressure on the latter, which propelled a mind-blowing price slump. LUNA traded above $80 a week ago, but it sits at $0.000055 as of writing these lines. Many exchanges have halted trading, and Terra announced (another) blockchain stoppage hours ago.