- Binance suspended the withdrawal in the Terra network due to high traffic in the environment.
- Traders worry LFG may sell BTC in the reserve to stabilize the current situation.
The crypto market as a whole is facing a massive downfall for the past few days, every other coin has been trading in red for the past 7 days. Even the major coins like Bitcoin (BTC) or Ethereum (ETH) are not immune to this condition. Terra’s LUNA has seen around 90% fall in its rate, according to CMC at the time of writing. The price of LUNA last month was around $99, the current price is $1.60, and the drop is immense.
The misevent began for Terra at the start of May 2022, when the subsequent amount of UST Terra stablecoin was withdrawn from Anchor protocol and Curve. To overcome this, LFG announced preventive measures on May 9, such as lending $750 million BTC to OTC traders, and expected the situation can be brought under control.
On the contrary, the number of withdrawals increased in a manner causing such high congestion on the Binance platform that it had to suspend all the withdrawal transactions on LUNA & UST. After some time, the issue was resolved and the withdrawal was resumed.
Binance tweet:
Withdrawals on Terra Network $LUNA temporarily suspended.https://t.co/hIGrAEzOwD
— Binance (@binance) May 10, 2022
Agitation among Traders
Terra’s UST is stated to be an algorithmic stablecoin, the value pegged is maintained by program code & minting and burning its sister coin LUNA. Like other stable coins, UST doesn’t make use of fiat currency or assets in reserve to back it up, it greatly depends on LUNA for its stability. Since the downfall of LUNA, UST has also de-pugged, the value is $0.4, at the time of writing. Nic Carter, the co-founder of Coin Metrics, commands that UST is backed by faith.
Nic Carter states:
“ No algorithmic stablecoin has ever succeeded and this is no exception. It’s not fully guaranteed, it’s certainly not fully backed by reserves, It was really just backed by faith in the issuer effectively.”
The greater fear now is whether LFG will sell the BTC that it has in reserve. As of now, Terra has $3.5 billion worth of BTC in-store and had planned to obtain $10 billion by the end of Q3 this year, which was believed to strengthen the UST. But professionals now expect that LFG will release those BTC to get a hold of the crisis, at the same time some investors are afraid that if BTC is released, it may worsen the situation with Terra coins.
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