Terraform Labs CEO Do Kwon acknowledged that a Bitcoin (BTC) decline would be “negative” for TerraUSD (UST) stablecoin, but expects Bitcoin to increase.

Terraform Labs is the unit behind the Terra blockchain platform that plans to buy BTC worth $ 3 billion in ground-based government reserves.

Kwon made the comments in an interview with the Unchained podcast on Tuesday. Host Laura Shane asked Kwon about the short-term effects of holding a large amount of bitcoin on the stability of terrestrial vaults.

“The worst case scenario is if we bought bitcoin and six months later there was a crash associated with a massive drop in demand for underground treasuries,” said Kwon, who, he humbly said, would be “negative.” However, this text keeps him up at night:

“I would like to bet that the long-term scenario of Bitcoin rise and hold strong enough to counteract a fall in demand for underground treasuries is the most likely scenario.”
Kwon bought bitcoins to hold in Terra’s vault as a 40% guarantee for UST. Terra has captured 30,727.9 BTC so far and recently 2,943 BTC on Tuesday. This makes Terra the third largest holder of BTC with a single wallet.

Crypto YouTuber Danku_r told his 54,000 followers in a tweet on Wednesday that adding BTC to Terra’s treasury will help curb the impact of the sudden fall in demand for terrestrial treasuries. He said Tira’s move would help prevent a “death spiral of market uncertainty” by helping the Treasury “swallow the reduced supply of underground reservoirs.”

One of Kwon’s stated goals for the Treasury, known as the Luna Foundation Guard, is to make Terra “the largest single holder of a BTC wallet”. According to the Bitcoin wallet tracking service, Bitcoin Treas

Later in an interview, Kwon lived up to his reputation as a provocateur by saying that Terra is a Layer 2 solution for the Bitcoin network. With Terra, he said, Bitcoin has a bridge that allows it to be used “in a variety of applications from DAO to NFT to DeFi.”

“And in terms of expressiveness, transactional ability and throughput, anything can happen in Terra.”
Related: ‘Hold My Beer’ – Terra has already earned $ 165 million to buy Bitcoin as BTC Stash approaches Tesla

Kwon’s comment caught the attention of the crypto community. In a tweet, the developer of Ethereum Antipro Synthetic responded by asking if all institutions that use BTC to support stablecoin should be considered a Tier 2 solution. He said: “Even I do not think Bitcoin standards have fallen that far.”

The Level 2 solution helps a Level 1 blockchain to scale operations by moving multiple transactions to an alternate network to reduce congestion.

According to the Cointelegraph Price Index, BTC is trading at $ 44,463, down 5.61% in the last 24 hours.

Source: CoinTelegraph