Binance has halted withdrawals of LUNA and UST tokens as the Terra-based cryptocurrency battles to regain its dollar peg. As LUNA’s price plummeted sharply due to a large selloff, the market price of UST, Terra’s stablecoin, went below the predicted $1.00 price level. Around the same time, the Binance BTC/UST trading pair hit new highs of almost $42,000, whereas other exchanges fought to keep their $30k.
“If you are using the public infra, please do not spam it at this time as we are experiencing naturally high levels of transaction volume. Please be mindful of our public infra usage. Please be mindful of our public infra usage.”
-TERRA on Twitter
The Luna Foundation Guard (LFG) currently has $171.4 million in USD in reserve, down 85 percent from the day before, $86.82 million in UST in reserve, down 41 percent from the day before, and $84.5 million in AVAX in reserve. The LFG’s bitcoin holdings, that were liquidated to underpin the peg, have been exhausted.
What are the reasons?
The massive amount of delayed UST transactions, according to Binance, is due to internet lag and latency. While acknowledging the potential for investor discomfort, Binance indicated that transactions for these cryptocurrencies will be reopened after the network is deemed secure and the number of backlog transactions has decreased. Users will not be notified in a subsequent notice.
However, according to CoinGecko, the value of LUNA, the Terra blockchain’s native asset that may be burnt in exchange for UST in normal market conditions, has dropped from over $62.50 just 24 hours ago to around $28.50. Terra and LFG must also deal with significant volatility in the larger crypto markets. Bitcoin’s price fell below $30,000 briefly yesterday before rising to roughly $31,500 at time of writing. According to a Cointelegraph analysis based on CoinGecko data, UST’s overall market capitalization increased by 15% in the last 30 days to $17.5 billion, slightly greater than BUSD’s market capitalization of $17.46 billion.