Following the Terra blockchain’s shutdown, Binance halted LUNA/BUSD and UST/BUSD on its spot trading platform.
What is Binance?
Binance was investigated by the US Department of Justice and the Internal Revenue Service in 2021 on charges of money laundering and tax evasion. In June 2021, the Financial Conduct Authority of the United Kingdom ordered Binance to cease all regulated operations in the United Kingdom. Binance disclosed client data with the Russian authorities in 2021, including names and addresses.
Following the catastrophic drop of the algorithmic stablecoin, Binance has halted trading pairings with the Terra ecosystem’s cryptocurrencies, LUNA and TerraUSD (UST), on its platform.
What is LUNA crypto?
Luna is a traditional cryptocurrency founded in South Korea that is linked to the Terra stablecoin. Terra is, in turn, expected to be pegged to the US dollar. People were meant to be able to trade one for the other if one of the two dropped below that price.
People could exchange Terra for $1 worth of Luna if it traded for less than $1. People could acquire $1 of Luna and then swap it for more than a dollar of Terra if Terra traded for more than $1.
Binance stopping spot trading
On May 13, Binance announced the action, suspending spot trading for the LUNA/BUSD and UST/BUSD trading pairs. It’s unclear when LUNA and UST withdrawals will resume, as the crypto exchange just indicated that it will wait for the Terra network issues to be resolved before proceeding.
Following one of the most major black swan occurrences to impact the space since the creation of Bitcoin (BTC) in 2009, it is the latest step by the world’s largest cryptocurrency exchange by trading volume.
Despite promises to save the failing LUNA and UST, Binance Futures delisted coin-margined LUNA perpetual futures on Thursday. Following the meltdown of the Terra blockchain’s LUNA currency, validators were compelled to take the network offline on May 12 in order to prevent any governance attacks.
LUNA crashes, devaluing UST
On May 10, Terra’s LUNA and its algorithmic stablecoin Terra USD crashed dramatically as UST lost its $1 peg. The system was meant to maintain its peg to the US dollar automatically, but it failed, causing the UST to devalue and LUNA tokens to be created at an unprecedented rate.
The crash was catastrophic, with the value of LUNA plummeting by 95 percent in a matter of days. Do Kwon, the founder of Terra, has issued a short-term roadmap to help the ecosystem recover. The plan called for burning $1.4 billion UST and staking 240 million LUNA tokens in order to keep the UST $1 peg from depreciating.