Since the start of this week, the cryptocurrency market has undergone a severe bearish spell. Several tokens have shed a major portion of their value. The likes of Bitcoin and Ethereum lost their support levels to touch new lows. However, the center of attention was Terra’s Luna and UST.
Since last year, LUNA has been one of the most significant performers in the crypto market. However, its recent crash has shocked the entire crypto community. The coin that just touched $120 recently fell under $1 in a matter of a few hours. Once the seventh-largest cryptocurrency by market cap was brought to its knees in a short time. The investors and traders of the coin were shattered as many of them lost large sums of money amid the price crash.
On the other hand, the stablecoin of Terra, UST, also lost its $1 peg. The token fell to a low of $0.225, and the worst part is that it is still unable to recover from that and regain the $1 mark. In a bid to recover its stablecoin, Terra was also forced to sell its Bitcoin holdings. This Bitcoin fund was built by the Terra ecosystem over the past few months. Therefore, these events caused a major disruption in the crypto space.
Terra blockchain validators move to avoid governance attacks
The network validators of the Terraform Labs are anticipating governance attacks on the Terra ecosystem. In a bid to counter these attacks, these validators have decided to halt the network activity for an undefined time period. The network expects severe governance attacks after a major price depreciation of the LUNA token in the market.
Through its official Twitter handle, Terraform Labs has announced that its blockchain network was halted at a block height of 7,603,700. The network further stated that the move was taken after severe $LUNA inflation. Therefore, the cost of attacks would have been greatly reduced which could potentially have triggered more governance attacks.
The move indicates that Terra is not at all confident in protecting its network from governance attacks after the degradation of the LUNA token. It is an unpleasant development for the Terra community which has already suffered great losses in the past couple of days. The pessimism and defensive approach of the network show that there is no certainty of an immediate recovery.
Binance will soon delist LUNA contracts
Even though the Terra network is continuously trying to make recoveries, there are no positive developments to show against their name. In this situation, several cryptocurrency exchanges are moving against the token. Globally, exchange platforms have issued warnings to their users against trading LUNA or using UST amid sheer volatility. Moreover, the leading global cryptocurrency exchange, Binance, announced that it will delist LUNA contracts if the coin falls below 0.005 USDT in valuation. However, the coin has already plunged below this price mark. It is reported that the delisting was completed at 3:30 pm UTC on Thursday.
The reports and developing stories suggest that the worst is still not over for LUNA or the Terra ecosystem. The company came up with a recovery plan to bounce from the current situation. Do Kwon, the co-founder of Terraform Labs also shared the details of this plan that was meant to avoid further degradation of LUNA and UST. Unfortunately, none of that plan has worked out well for Terra. The network announced to burn the remaining UST in the community pool along with 371 million UST cross-chain on Ethereum. Terraform Labs also staked 240 million LUNA tokens for this purpose.
But the selling pressure from the market is incredibly high. The implications of this pressure have been felt across the market. Not many experts are weighing on Terra to make a comeback from this situation. However, nothing is entirely impossible in the crypto market. Just before this week, LUNA was among the top 10 cryptocurrencies and UST was the third-largest stablecoin. However, the tables have turned quite quickly for both of these tokens.