The Avalanche Foundation is preparing to buy back nearly 2 million AVAX tokens sold to Terra just before its collapse in 2022. This transaction, pending approval from a bankruptcy court, marks a new chapter in the turbulent history of the crypto market.
A transaction under the sign of caution
The initial sale of AVAX to Terra dates back to April 2022, when the Avalanche Foundation ceded 1.97 million tokens for $100 million to the Luna Foundation Guard (LFG).
This transaction was intended to strengthen the reserves of the algorithmic stablecoin TerraUSD. However, the sudden collapse of the Terra ecosystem a month later changed the game entirely.
Today, the Avalanche Foundation is looking to regain control of these tokens for several reasons:
- Preserve the integrity of the Avalanche ecosystem by avoiding a potential massive sale on the market.
- Ensure compliance with the use restrictions initially planned in the agreement with Terra.
- Simplify the ongoing bankruptcy procedure for Terraform Labs, Terra’s parent company.
This decision reflects prudent asset management by the Avalanche Foundation, which is keen to protect the value and stability of its native cryptocurrency.
A reflection of crypto market turbulence
This buyback represents more than just a financial transaction. For Avalanche, it is a strategic maneuver aimed at strengthening its position and protecting the value of its tokens.
By recovering these AVAX at a price below their current market value, the Foundation is undertaking a financially advantageous operation while avoiding the potential complications associated with a liquidation by a bankruptcy trustee.
The buyback of AVAX tokens at a price 42% lower than their original value perfectly illustrates the significant fluctuations that characterize the crypto market. The volatility of prices remains an unavoidable reality, even for established projects like Avalanche.
Moreover, the collapse of Terra continues to have repercussions on the entire crypto ecosystem, more than a year after the events, demonstrating the interconnected nature of this industry.
This transaction also highlights the crucial importance of risk management and governance in the crypto universe. Strategic alliances, like the one initially formed between Avalanche and Terra, can quickly transform into potentially dangerous liabilities. Major players in the sector must therefore demonstrate great agility to adapt to a constantly evolving environment.
