Binance halts Luna and UST trading after collapse – TechCrunch
Binance, the world’s largest cryptocurrency exchange, halted trading of Terraform Labs’ Terra (Luna) and TerraUSD (UST) tokens on its platform following one of the industry’s biggest meltdowns.
The exchange suspended trading of the Luna and UST tokens on all of its spot, cross and isolated margin pairs indefinitely after the tokens lost nearly 100% of their value in a matter of days.
The move, which follows the exchange of support for futures trading for the Luna token earlier on Thursday, comes as Terraform Labs has increased the circulating supply of Luna tokens to over 6.5 trillion, up from 386 million three days ago (according to Terrascope, a tool that tracks Terra stats) in a bid to nudge its sister token, a supposed stablecoin, back to its 1-to-1 peg to the dollar.
Dozens of other crypto exchanges, including FTX, Crypto.com, KuCoin, OKX, and CoinDCX, have taken action in recent hours to resolve the incident.
Meanwhile, Terraform Labs has mentioned he shuts down the Terra blockchain and works to “come up with a plan to get it back together”. This is the second time the Terra blockchain has been frozen this week. Earlier Thursday, Terraform Labs briefly shut down the network to prevent any hacking.
“An exponential number of new LUNAs have been manufactured due to flaws in the design of the Terra protocol. Their validators suspended their entire network resulting in no possible deposits or withdrawals to or from any exchange,” Changpeng Zhao, Founder and CEO of Binance, said in a Twitter thread.
“Some of our users, unaware of the large amounts of newly created LUNA outside the exchange, started buying LUNA again, not understanding that as soon as deposits are allowed, the price will probably fall further. Due to these significant risks, we have suspended trading,” he said.
TerraUSD, a so-called algorithmic stablecoin, aims to substitute for the dollar by intertwining with Luna, which has no fixed value. The plan is that if the value of TerraUSD falls below $1, it could be “burned” and exchanged for a Luna dollar, and vice versa.
But when TerraUSD fell below $1 earlier this week, the reason for which remains to be confirmed, this algorithmic view showed its limits and fell apart miserably.
Loss of confidence from the crypto community and aggressive panic selling caused Luna’s price to drop to $0.0000011 from around $80 earlier this week. The value of the UST was 3 cents when this story was originally published.
Terraform Labs has been scrambling to find ways – apparently including trying to raise funds – to fix the situation, but so far has been unlucky. Asked for his opinion, Sam Bankman-Fried, co-founder of FTX exchange and investment and market-making firm Alameda Research, said on Thursday that “the real and honest answer is that probably UST or LUNA must go to 0 (or both).
“There’s no way to save them both. (And it’s not clear right now that there’s a way to save the UST anchor even if you sacrifice LUNA.),” said Bankman-Fried, who has previously helped save another project (SushiSwap).
Binance’s Zhao, one of the most influential figures in the crypto industry, said he was “very disappointed” with how the incident was handled by the Terra team. “We asked their team to restore the network, burn the extra LUNA and recover the UST ankle. So far we have received no positive response, or much response at all.
Zhu Su, co-founder and partner of Three Arrow Capital, an investor in Terraform, said in a Twitter thread that “attacks and subsequent unanchoring risks were flagged by critics; the fast-growing ecosystem should have done more to move slowly and safely.
Su acknowledged that many industry figures have warned of such a potential attack in recent months. “Critics had genuine concerns about parity risks and discussion going forward needs to be encouraged, ‘FUD’ needs to be rebutted, growth needs to be organic if slower. This is Terra’s DAO hack time,” he said.