Global cryptocurrency exchange Binance has suspended trading pairs of Terra ecosystem cryptocurrencies, LUNA and TerraUSD (UST), on its platform following the big drop in the algorithmic stablecoin.
Binance confirmed the move on May 13, with the suspension of spot trading for the LUNA/BUSD and UST/BUSD trading pairs. It is unclear when withdrawals for LUNA and UST will resume, as the exchange simply stated that it will wait for the issues with the Terra network to be resolved.
This is the latest move by the world’s largest cryptocurrency exchange by trading volume following one of the biggest black swan events to hit the industry since the inception of Bitcoin (BTC) in 2009.
Binance Futures delisted LUNA perpetual contracts, despite plans to save the floundering LUNA and UST. Terra blockchain validators were forced to shut down the network on May 12 in an effort to curb potential governance attacks following the network’s LUNA token drop.
Binance founder Changpeng ‘CZ’ Zhao use his Twitter account to address the situation, with the exchange always being cautious about making decisions that may have further effects on cryptocurrency markets and prices.
CZ said the move was necessary due to the decision by Terra validators to take the network offline, making it impossible to make deposits or withdrawals to or from any exchange. Binance’s CEO believes that the decision to suspend trading on its platform would safeguard unwitting investors who continued to acquire LUNA in hopes of capitalizing if and when the LUNA network resumes operation:
“Some of our users, unaware of the large amounts of newly minted LUNA off the exchange, started buying LUNA again, not understanding that as soon as deposits are allowed, the price is likely to plummet further. Due to these important risks, we have suspended trading.
CZ noted that Binance intended to maintain neutrality with respect to users and industry peers and typically refrained from commenting or taking action towards other projects. The ongoing debacle left CZ with no choice but to break that rule:
“I am very disappointed in the way this UST/LUNA incident was handled (or not handled) by the Terra team. We asked your team to restore the network, burn the extra minted LUNAs, and bring the UST back to parity. Until Now, we haven’t gotten any positive feedback or any feedback at all.”
Terra’s LUNA token and its Terra USD algorithmic stablecoin suffered a dramatic drop on May 10, when the UST lost its peg to the US dollar. The system was designed to automatically maintain its parity with the dollar, which caused a systematic devaluation of UST, while many LUNA tokens began to be minted at an unprecedented rate.
The drop was catastrophic, as the value of LUNA sank 100% in a week. Terra founder Do Kwon published a short-term roadmap to try and revive the ecosystem. The proposal was to burn $1.4 billion of UST and stake 240 million LUNA tokens in an effort to stop the devaluation of the $1 parity of UST.
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