This purchase, which was made to support the Terra blockchain ecosystem, was made to ensure the stability of the UST stablecoin. In this process, Avalanche Foundation completed the repurchase of the remaining 1.97 million AVAX tokens held by LFG.

At that time, LFG aimed to maintain the stability of the Terra ecosystem by creating various digital assets and crypto reserves under the leadership of its founder Do Kwon, in order to protect the TerraUSD (UST) stablecoin. In this process, $100 million worth of AVAX tokens were purchased and various swaps were made between LUNA and other crypto assets.

In an announcement, Avalanche Foundation stated that it has completed the token buyback process. However, during this period, there were significant fluctuations in the price of the tokens.

Avalanche Foundation stated in the application that the tokens would be purchased for $45.5 million. However, at the time of writing, the price of the Avalanche token (AVAX) was trading at $26.95.

This brings the total value of 1.97 million tokens to approximately $53 million. Fluctuations in the token price, Terra’s collapse process and the impact of market conditions created an uncertain environment for investors.

Do Kwon, founder of Terraform Labs, established Luna Foundation Guard in 2022 to support the Terra blockchain network and protect the value of the TerraUSD (UST) stablecoin.

LFG established reserves of Bitcoin and altcoins to protect the dollar value of UST and purchased $100 million worth of AVAX tokens to support the UST stablecoin, which was worth $16.7 billion at the time.

However, Terraform Labs sought to strategically align ecosystem incentives by exchanging $100 million worth of Terra (LUNA) tokens with AVAX. However, after a short time, the Terra blockchain ecosystem collapsed.

By May 2022, the UST suffered a significant depreciation by losing its dollar peg. This caused a massive drop in the price of LUNA and a widespread collapse of the Terra ecosystem.

This crisis experienced by Terra affected the entire crypto market and caused great losses to investors. Following the incident, Avalanche Foundation initiated efforts to buy back AVAX tokens from LFG.

This buyback was seen as part of the foundation’s efforts to stabilize the ecosystem and regain market confidence after the Terra collapse. On October 12, Avalanche Foundation reached an agreement with LFG to buy back the tokens.

This step ensures that LFG does not violate restrictions in the original agreement on the use of tokens and prevents the tokens from being liquidated in a complex bankruptcy process, the foundation said.

In its latest statement, the Avalanche Foundation stated that the token buyback is an “important step” aimed at supporting the sustainability of the Avalanche ecosystem. The non-profit foundation announced that the withdrawn tokens will be used in efforts to strengthen the ecosystem.

These tokens will be used to support various projects such as grants, events and incubation programs. Thus, the foundation aims to ensure long-term stability in the crypto ecosystem and create a safe environment for investors.