Crypto Exchange Binance Suspends Withdrawal of Terra (LUNA) and UST Stablecoins

The UST stablecoin de-peg with the U.S. Dollar has created a storm on Satoshi Street. Earlier today, the UST price dropped to a low of $0.60 de-pegging by a staggering 40% from the Dollar. This has resulted in massive liquidations of UST as well Traa’s native cryptocurrency LUNA.

As of press time, the Terra (LUNA) cryptocurrency is down 60% slipping under $25 for the first time since September 2021. In the wake of these developments, crypto exchange Binance announced that it has temporarily suspended the withdrawal of LUNa and the UST stablecoin. The official announcement reads:

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. We apologize for any inconvenience.

The Lunda Foundation Guard Starts Liquidating Its Bitcoins

This is a real test for Terra’s parent organization, the Luna Foundation Guard (LFG). LFG has started liquidating its Bitcoin reserves to buy UST and bring stability back to its troubled UST stablecoin. Popular crypto analyst Colin Wu explains:

The Bitcoin address of the Luna Foundation Guard (LFG) has just transferred 28,205.5 Bitcoins to Binance, and the balance of the address is 0 now. The address transferred 42,530 bitcoins out earlier today and then transferred 28,205 bitcoins in.

However, the recent update by the Luna Foundation Guard notes that it has started to loan its Bitcoin reserves to MMs. It added:

Last clip withdrawn by the LFG was ~37K BTC. Similar to the last deployment, it has been loaned to MMs. Very little of the recent clip has been spent but is currently being used to buy $UST. Updates coming. 

however, the biggest question here remains is that even if Terra manages to get this situation in control, it will be difficult to regain the investors’ trust to use the UST stablecoin.