As the crypto community continues to figure out Terra’s ongoing pegging-de-pegging dilemma about its stablecoin offering TerraUSD, Binance momentarily restricted withdrawals for LUNA and UST on Tuesday regarding its stablecoin offering TerraUSD (UST).
The withdrawal of Terra’s LUNA and UST tokens has been “temporarily suspended,” according to Binance’s official website.
Withdrawals were paused “due to a large level of pending withdrawal transactions,” with the business promising to resume them once “the network is stable, and the volume of pending withdrawals” has decreased.
LUNA and Terra Ecosystem
Luna (LUNA) and TerraUSD (UST), the Terra network’s native currencies, are two blockchain-based initiatives created by Terra Labs in South Korea. The Terra stable coins price is maintained by LUNA, which decreases market volatility and keeps the price stable.
Users and community members’ reactions to this suspension
The community has reiterated the term “not your keys, not your coins” since clients worldwide cannot withdraw their assets and cited the suspension of Binance’s funds as one of the fundamental disadvantages of a centralized crypto exchange.
On the other side, some community members defended the decision, claiming that Binance CEO Changpeng “CZ” Zhao saved many investors from liquidation by selling a stablecoin for $0.70.
How is UST adding fuel to LUNA’s crash?
One UST may always be exchanged for one LUNA and vice versa. The UST transferred for LUNA is destroyed and removed from circulation each time this swap is done. When LUNA is exchanged for UST, however, that LUNA is destroyed.
For astute investors, this presents an appealing arbitrage opportunity. If UST falls below its dollar peg, it’s possible to acquire the discounted stablecoin and subsequently swap (and destroy) it for $1 in LUNA.
An investor can earn handsomely while also eliminating UST from circulation and increasing demand for stablecoin.
