Could Bitcoin Become a Reserve Currency?

There is a growing movement to make bitcoin a booking digital currency A cryptocurrency platform hopes to hold $10 billion worth of bitcoin to back its own “stable currency.” Stablecoins are a growing group of cryptocurrencies that aim to reduce price swings and are typically backed by US dollar reserves.

The platform is called Terraform Labs. It is based in Seoul, South Korea. So far, he has amassed nearly 40,000 bitcoins worth $1.7 billion in a series of purchases through a nonprofit called Luna Foundation Guard.

Do Kwon is a co-founder of Terraform. Last month, he announced on Twitter that the company would buy $10 billion in bitcoin reserves to support TerraUSD.

These purchases, and the possibility of more to come, are helping to boost the price of bitcoin, which is now worth $48,000. However, it’s unclear if others will follow Terraform’s lead.

“Buying $10 billion can move the price in the short term,” said Sid Powell, CEO of Sydney-based crypto lender Maple Finance. “But over a longer period, it’s more of an indication: that Bitcoin has emerged as the most popular form of collateral currency support.

However, other market insiders said a closer relationship between bitcoin and stablecoins like TerraUSD could present a new risk to crypto markets.

“There is a danger that some people are trying to position themselves well in advance of the purchase, which could exaggerate a drop if the price starts to decline, said Richard Usher. He is at the BCB Group crypto firm in London.

Stablecoins are rapidly gaining popularity. They are a common form of exchange. They are often used by traders looking to move funds and predict the value of other cryptocurrencies.

For example, it is much easier to spend tether, the largest stablecoin, in bitcoin or other cryptocurrencies than it is to spend US dollars in bitcoin.

TerraUSD is now the fourth largest stablecoin. Like other stablecoins, it is pegged to the dollar.

Bitcoin reserves add another level of security, while keeping the Terra project decentralized.

Matthew Sigel is a market researcher. He said that he hoped other stablecoins would follow Terra’s lead and back their coins with bitcoin reserves. They could even back it with other cryptocurrencies, if the experiment is successful.

I’m Dan Novak.

Dan Novak adapted this story for VOA Learning English from a Reuters report.


words in this story

bookingnorth. a supply of something that is stored so that it can be used at a later time

collateral north. something you promise to give someone if you can’t pay back a loan

exaggerate north. to think or describe something as bigger or bigger than it really is