- Terra’s LUNA and UST prices are in free fall, having plummeted 53% and 15.5%, respectively.
- Binance cited network slowness and congestion and suspended withdrawals for both LUNA and UST.
- Terra used Bitcoin reserves to defend UST’s peg; now, $1.4 billion Bitcoin is on the move, hitting exchanges like OKX.
Terra’s algorithmic stablecoin UST entered free fall after losing its peg. The stablecoin is now trading at $0.87, 13% below the $1 level, and the LUNA price has dropped over 53% overnight. Cryptocurrency exchanges like Binance have suspended withdrawals for Terra’s LUNA and UST.
Terra price nosedived, as algorithmic stablecoin UST collapsed
UST Terra, the algorithmic stablecoin of Terra, slipped from its $1 peg to its lowest point of $0.74 over the past few days. UST is currently trading 13% below $1, at $0.87. The stablecoin continues to trade solidly below its peg.
In a broad market-wide sell-off, Terra’s LUNA and UST collapsed. Do Kwon, the CEO of Terraform Labs, considers this sell-off a coordinated attack against the protocol.
Kwon assured investors that the Luna Foundation Guard (LFG) council is “not trying to exit its Bitcoin position” by moving $1.4 billion in BTC and UST, instead, it is putting capital in the hands of a professional market maker to strengthen the peg of the algorithmic stablecoin.
The world’s largest cryptocurrency exchange Binance has suspended withdrawals of LUNA and UST, citing network congestion and slowness. Withdrawals for both tokens were suspended at 2:20 UTC on May 10, 2022, as there was a high volume of pending withdrawals. The exchange has announced that withdrawals will resume once the network is stable.
$1.8 billion were wiped out of UST’s market capitalization since it lost its peg. Since UST is an algorithmic stablecoin, it maintains its peg by burning LUNA and minting UST. The LFG council has deployed vast amounts of Bitcoin reserves to restore the stablecoin’s stability, to no avail.
Proponents in the crypto community have criticized UST and believe it is not truly decentralized since it has collateral backing used by a single party that performs open market operations. Since Terra has failed to defend the peg, the colossal crash has fueled a bearish sentiment among LUNA and UST holders.
Samuel Bankman-Fried, the CEO of FTX exchange, had predicted that volatile assets wouldn’t survive market crashes nearly a month ago. Iron Finance’s stablecoin IRON recently crashed to zero, making UST the second stablecoin to fail.
@Route2FI, a crypto analyst and researcher, believes Terra would change something in the LUNA/UST mechanism, and the tokens will recover from the recent crash.
broken with this.
— Route 2 FI (@Route2FI) May 10, 2022
I will follow the situation closely.
I don't think Terra is dead, and it will be very interesting to see if they will change something with the $UST / $LUNA mechanism. Maybe a $FRAX-model?
No matter what happens, it will take time to build trust.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
Is Altcoin Season here as Bitcoin reaches a new all-time high?
Bitcoin reaches a new all-time high of $98,384 on Thursday, with altcoins following the suit. Reports highlight that the recent surge in altcoins was fueled by the victory of crypto-friendly candidate Donal Trump in the US presidential election.
Shanghai court confirms legal recognition of crypto ownership
A Shanghai court has confirmed that owning digital assets, including Bitcoin, is legal under Chinese law. Judge Sun Jie of the Shanghai Songjiang People’s Court shared this opinion through the WeChat account of the Shanghai High People’s Court.
BTC hits an all-time high above $97,850, inches away from the $100K mark
Bitcoin hit a new all-time high of $97,852 on Thursday, and the technical outlook suggests a possible continuation of the rally to $100,000. BTC futures have surged past the $100,000 price mark on Deribit, and Lookonchain data shows whales are accumulating.
Shiba Inu holders withdraw 1.67 trillion SHIB tokens from exchange
Shiba Inu trades slightly higher, around $0.000024, on Thursday after declining more than 5% the previous week. SHIB’s on-chain metrics project a bullish outlook as holders accumulate recent dips, and dormant wallets are on the move, all pointing to a recovery in the cards.
Bitcoin: New high of $100K or correction to $78K?
Bitcoin surged to a new all-time high of $93,265 in the first half of the week, followed by a slight decline in the latter half. Reports highlight that Bitcoin’s current level is still not overvalued and could target levels above $100,000 in the coming weeks.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.