The Avalanche Foundation has taken an important step by buying back 1.97 million AVAX tokens previously purchased by LFG to support the Terra blockchain ecosystem. According to the statement, the Avalanche Foundation has completed this buyback process and the tokens in question are now within the foundation.
Avalanche Foundation Completes AVAX Buyback$AVAX
In 2022, LFG (Luna Foundation Guard), created by Terraform Labs founder Do Kwon, created a reserve fund to support the TerraUSD (UST) stablecoin. Within the scope of this fund, $100 million worth of AVAX tokens were purchased and aimed to strengthen UST's reserves together with Bitcoin (BTC). However, LFG's strategy failed with the collapse of the Terra ecosystem and UST's loss of dollar stability. Now, the Avalanche Foundation has taken back the 1.97 million AVAX tokens and brought these tokens into its own structure.
Buyback Process and Agreement Details
The Avalanche Foundation has committed to pay $45.5 million for the token buyback, while the market price of AVAX at the time of the buyback was around $26.95. In this case, 1.97 million AVAX tokens were worth approximately $53 million. This buyback agreement honors previous agreements between LFG and the Avalanche Foundation, while also ensuring that the tokens are secured without being involved in a complex bankruptcy process.
The Foundation Will Use It to Strengthen the Ecosystem
The Avalanche Foundation stated in a statement that this buyback is a critical step for the sustainability of their ecosystem. The Foundation emphasized that it will use AVAX tokens for supporting projects and plans to use these tokens in various events, grants, and incubation programs. This step provides an important opportunity for the Avalanche ecosystem to achieve stronger and long-term growth.
LFG’s AVAX Reserve and Terra’s Collapse
LFG made large-scale token purchases in 2022 to ensure TerraUSD maintained its dollar peg. These reserves were supported by Bitcoin and AVAX tokens to keep the Terra ecosystem healthy. However, the loss of UST’s dollar peg in May 2022 led to a major collapse in the Terra ecosystem. Along with the devaluation of UST and LUNA, LFG’s AVAX reserves also suffered significant losses.
Secured Tokens Will Strengthen Avalanche Ecosystem
The $100 million worth of AVAX tokens held by LFG have not returned to the foundation since the collapse of Terra and were at risk of being sold. However, thanks to the agreement with the Avalanche Foundation, these tokens have been secured and directed to the foundation’s own initiatives. The foundation plans to use these tokens to develop its ecosystem, support community activities, finance research projects, provide innovative grants, and provide financial support for new projects. This strategic step will contribute to the strengthening of the Avalanche ecosystem and create a more sustainable growth process.