Avalanche to Repurchase AVAX Tokens from Terra Estate

In a move aimed at maintaining the integrity of its token agreements, the Avalanche Foundation announced it has struck a deal to repurchase 1.97 million AVAX tokens from Terraform Labs’ bankrupt estate. The tokens, originally acquired by the Luna Foundation Guard (LFG) in April 2022 for $100 million, are now valued at $56 million, following a 44% price drop since their purchase.

Terra’s Collapse and the AVAX Token’s Future

The Luna Foundation Guard, a Singapore-based nonprofit, initially bought these AVAX tokens to support its reserves for Terra’s UST stablecoin. At the time, UST was the fourth-largest stablecoin in the market. However, when the Terra ecosystem collapsed in May 2022, it cast doubt on the future of AVAX tokens held by the Luna Foundation Guard.

In its announcement, the Avalanche Foundation emphasized that this repurchase ensures the tokens will not be subjected to the complexity of a bankruptcy trustee liquidation. “This action ensures that LFG would not violate the original agreement’s restrictions on the tokens’ use and shields the tokens from the complexity of a bankruptcy trustee liquidation,” the Foundation shared on X.

Financial Terms and Market Response

While the financial terms of the deal were not disclosed, the current market value of the 1.97 million AVAX tokens stands at approximately $56 million—significantly lower than the $100 million value at the time of purchase. The agreement is pending approval from the bankruptcy court overseeing Terraform Labs’ estate, following a bankruptcy judge’s decision in September to wind down the company’s operations.

The announcement of the repurchase also comes as Avalanche’s token price surged by 13%, rising from $25.16 on October 10 to $28.50. The increase coincides with the growing success of the new video game Off The Grid, which features an in-game economy powered by Avalanche’s blockchain Subnet technology.

Ensuring Stability Amid Uncertainty

This move by the Avalanche Foundation highlights the ongoing efforts to stabilize both the Avalanche and Terra ecosystems in the wake of Terra’s collapse. By repurchasing the AVAX tokens, the Avalanche Foundation aims to protect its network from any further fallout related to Terra’s bankruptcy. The decision also illustrates how blockchain projects are navigating complex financial and legal environments, especially when tied to troubled entities like Terraform Labs.

The Avalanche Foundation’s repurchase of 1.97 million AVAX tokens from Terraform Labs’ estate marks an important step in securing the future of these assets. As the deal awaits court approval, the crypto community will be watching how the transaction unfolds and whether it inspires similar moves in other projects affected by Terra’s downfall.