Binance has temporarily suspended withdrawals of the two major Terra blockchain tokens including LUNA, the native token of Terra, and Terra USD (UST), Terra’s flagship algorithmic stablecoin.
The exchange explained in a statement that the suspension was due to a high volume of pending withdrawal transactions caused by “network slowness and congestion.” Withdrawals will resume when the network becomes stable.
“Binance will reopen withdrawals for these tokens once we deem the network to be stable and the volume of pending withdrawals has reduced. We will not notify users in a further announcement,” Binance said.
What’s Binance’s deal with Terra?
Binance’s suspension of LUNA and UST withdrawals comes after a price crash in both tokens. Yesterday, UST lost its dollar peg for the second time in three days.
According to CoinMarketCap, UST fell to a low of $0.68 in the last 24 hours but is currently trading at around $0.92. The de-pegging has also affected the price of LUNA. CMC data also shows that LUNA has dropped 48.11% on the day to around $32.
The price drop began from what community members are calling a coordinated attack. On Friday, one observer took to Twitter to note that massive withdrawals of UST had been happening on Anchor Protocol (ANC), a decentralized exchange (DEX) on the Terra blockchain.
Subsequently, it was pointed out that large amounts of UST had found their way to other exchanges and were being dumped as the UST balance of Anchor continued to nosedive. Has Terra’s algorithmic stablecoin experiment failed?
The Luna Foundation Guard (LFG) has been active in trying to bring the algorithmic stablecoin back up to peg. The LFG announced in a tweet that based on its mandate, it has voted to deploy $1.5 billion from its reserve to absorb the shock.
“Per the LFG’s mandate, the LFG will proactively defend the stability of the UST peg and broader Terra economy, especially under volatility and the uncertainty of macro conditions in legacy markets,” the LFG tweeted.
The funds deployed include a $750 million loan given to OTC trading firms to help the UST peg, and another $750 million UST to accumulate bitcoin as the market comes back to normal.
In a recent update, the founder of Terra, Do Kwon noted that more funds are being deployed. However, the tokens continue to remain in the dump at the time of writing. Similarly, Kraken and CoinList have also suspended withdrawals of LUNA and UST on their exchanges.
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