Terra (LUNA) and its stablecoin, UST, tank as Binance halts withdrawals citing network congestion

Key Takeaways:

  • Terra (LUNA) has lost over 60% in the latest market crash, making it the largest loser among major cryptos.
  • TerraUSD, the third-largest stablecoin, sank 23% to lose its 1:1 peg against the US Dollar.
  • Cryptocurrency exchange Binance halted withdrawals of LUNA and UST.
Terra (LUNA) lost over 60% of its price in the latest market crash, causing Binance to halt withdrawals, including in stablecoin UST.
Terra (Luna) tanked 60% as stablecoin UST lost its peg to the US Dollar. Credit: Binance Academy

YEREVAN (CoinChapter.com) – After Terra (LUNA) dumped nearly 60% on Monday to push its price below the $30 mark, the troubles for the coin don’t seem to end.

On Tuesday, the thirteenth largest crypto extended its losses to fall as low as $23.39 on exchanges before regaining some ground. Yesterday’s losses had already taken LUNA’s price to a new low in the current year. As a result, Terra retreated to under $25 for the first time since September 2021. Meanwhile, crypto exchange Binance halted all transactions in LUNA and stablecoin UST.

Terra (LUNA) tanked over 60%.
Terra (LUNA) tanked 60%. Credit: CoinMarketCap

As a result of Terra’s price dump, TerraUSD (UST) failed to stay 1:1 pegged to the USD. Instead, it crashed to as low as $0.6841 per token, according to CoinMarketCap. TerraUSD is the decentralized stablecoin of the Terra blockchain.

After UST fell below $0.99 over the weekend, the Luna Foundation Guard (LFG) sprang into action. On Monday, the foundation announced its move to bolster its stablecoin reserve by raising $1.5 billion.

Terra Lab co-founder and CEO Do Kwon tweeted about the decision to strengthen the liquidity around the UST peg.

“The LFG Council just voted to deploy 1.5B in capital (0.75B in BTC, 0.75B in UST) to allay market concerns around UST…The goal is to have this capital in the hands of a professional market maker, thus significantly strengthening the liquidity around UST peg,” 

Kwon claimed

However, Terraform Labs (TFL) failed to restore its peg to the dollar on a 1:1 basis despite such efforts. As a result, UST sank by nearly 24%, causing panic among traders. TFL is the organization behind UST, cryptocurrency LUNA, and Luna Foundation Guard (LFG).

Terra stablecoin UST lost nearly 24%, causing it to lose its 1:1 peg against the USD.
Terra stablecoin UST lost nearly 24%, causing it to lose its 1:1 peg against the USD. Credit: CoinMarketCap

Recommended: Terra makes ‘fishy’ attempts to maintain UST’s dollar peg as LUNA dips 25%

Binance Suspends Withdrawal of Terra (LUNA) & UST Stablecoins

Following the UST fiasco, cryptocurrency exchange Binance decided to suspend withdrawals of LUNA and UST tokens. In a blog post, the largest crypto exchange blamed “a high volume of pending withdrawal transactions” as a result of network congestion for the decision.

“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 announced.

As Terra continues to lick its wounds from recent losses, it will first have to take the situation under control. Its recovery after that will depend on its customers’ trust, regaining which may take longer than expected.

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Terra, Terra (LUNA) and its stablecoin, UST, tank as Binance halts withdrawals citing network congestion

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