Avalanche (AVAX) Will Drag Terra LUNA, Really?

AVAX is affected by LUNA. (Photo: Unsplash doc)

JAKARTA – Avalanche (AVAX) is one of the cryptocurrencies that is a reserve for TerraUSD. After the fall of UST, a subsidiary of Terraform Labs, Luna Foundation Guard, stated that it has no plans for its crypto deposit, AVAX.

Once linked to UST, the price of AVAX had fallen 14 percent on May 18. At that time, it was trading close to 35 US dollars until on May 19 the price had dropped to 28.50 US dollars.

The decline coincided with a South Korean news agency report claiming Terraforms Labs, developer of the Terra blockchain, owed 100 billion won (approximately US$78.5 million) to regional tax agencies, Cointelegraph reports.

The reason is, LFG reportedly has around 1.97 million AVAX tokens worth 58.39 million US dollars as a reserve fund aimed at sustaining the value of UST. Apart from holding AVAX, LFG also owns Bitcoin (BTC), Binance Coin (BNB) and LUNA.

Previously, LFG had sold most of its holdings to prop up the value of UST following its “depeg” from the US dollar. Until now LFG still keeps AVAX and has not sold a single coin.

The panic of investors because of the shadow of the collapse of UST and LUNA has an impact on the decline in the price of Avalanche which fell more than 50 percent this May. The panic that arose in the circles prompted AVAX to respond to this condition.

AVAX issued a statement via an announcement on Avalanche's official Twitter account stating: "Several members of the Avalanche Community have inquired about the details surrounding $AVAX owned by Luna Foundation Guard and Terraform Labs."

Furthermore, Avalanche explained transparently regarding LFG's purchase of AVAX to serve as Terra's reserve fund.

“If there is a planned sale of LFG reserves, the Avalanche Foundation stands ready to work with LFG on a sensible trading strategy,” reads a statement from AVAX, May 20, 2022.