Terra’s Native Stablecoin UST Loses Peg to USD, LUNA Value Tanks More than 50%
The Terra ecosystem is currently undergoing through some really tough time. Over the last weekend, a single whale entity sold $285 million worth of UST stablecoin on Binance and Curve which has led to it de-pegging from the U.S. Dollar.
Monday, May 9, was a major nightmare for UST and LUNA holders as the stablecoin de-pegged by 40% with the UST value dropping to $0.6. As the algorithmic stablecoin continued to de-peg, more and more LUNA, Terra’s native crypto, was released in the system.
The excessive supply of LUNA led to a severe correction in the LUNA price which tanked by 50% in a single day. Earlier today, the LUNA price dropped to a low of $25 per coin.
Now, in order to maintain the stability of its UST stablecoin, Terra’s parent firm - Luna Foundation Guard (LFG) - has been buying more and more of Bitcoins as reserves. LFG has pledged to buy $10 billion worth of Bitcoins.Last week, itself, the Luna Foundation Guard announced purchasing an additional $1.5 billion worth of Bitcoins.
Now that the things have turned upside down, the Luna foundation Guard has decided to loan its BTC reserves as well as the UST reserve. The immediate goal for LFG is to bring the price of UST to its peg value of $1.
After falling to a low of $0.70 earlier today, Terra’s UST stablecoin has recovered and is currently at $0.91. However, earlier today, crypto exchange Binance said that it will suspend withdrawals for LUNA and Terra’s UST stablecoin.
It added: “Withdrawals for LUNA and UST tokens on the Terra (LUNA) network were temporarily suspended on 2022-05-10 at 02:20 AM (UTC) due to a high volume of pending withdrawal transactions. This is caused by network slowness and congestion. 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”.
The good thing is that despite the recent crash, Terra’s UST stablecoin continues to be among the top-ten cryptocurrencies by market cap. It remains to be seen as to what further steps can the Luna Foundation Guard can take to safeguard its UST stablecoin as well as retain the interest of LUNA holders.