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Terra Network's LUNA price has continued to take a beating today as the Terra Network token plummeted 65% in 24 hours. In the last hour of trading alone, LUNA fell by 32%—from $22.96 to $16.95—before slightly rebounding to $17.71, according to CoinMarketCap.
LUNA, the native token of the Terra blockchain, was trading at around $65 on May 8. But it began to collapse as Terra's dollar stablecoin, UST, lost its peg. UST dropped to below $0.70 yesterday and has been struggling to get back to parity with the dollar. After a partial recovery to $0.93, it fell back down to under $0.75.
Terra co-creator Do Kwon tweeted today that he was "close to announcing a recovery plan for $UST." Any recovery plan will necessarily affect LUNA as well. UST is designed to retain its $1 value due to a complex algorithmic strategy that involves burning UST to mint LUNA, and vice versa. As the value of both spirals downward, the strategy—which incentivizes arbitrage—has fallen apart.
UST’s fall has renewed calls from U.S. government officials for stablecoin regulations. “A stablecoin known as TerraUSD experienced a run and declined in value. I think that this simply illustrates that this is a rapidly growing product and there are rapidly growing risks," said Treasury Secretary Janet Yellen today.
The situation has confounded cryptocurrency firms as well.
Earlier today, Binance, the largest cryptocurrency exchange by volume, announced that it had stopped withdrawals of LUNA temporarily until it "[deemed] the network to be stable and the volume of pending withdrawals has reduced."