- Binance on Friday suspended trading in TerraUSD and luna in the wake of price implosions for the cryptocurrencies.
- CEO Changpeng Zhao said an "exponential amount" of new luna coins were minted because of flaws in the design of the Terra protocol.
- TerraUSD traded well below its $1 peg on Friday and luna crashed to a zero value.
Binance on Friday halted trading of the algorithmic stablecoin TerraUSD and its related luna coin following price collapses that prompted administrators behind the digital assets to turn off their network.
The world's largest cryptocurrency exchange said in a notification that spot trading for the LUNA/BUSD and UST/BUSD trading pairs would be suspended Friday morning and that withdrawals for the coins will open when the Terra network becomes stable.
The moves come after a plunge in the value of the coins that began last weekend. TerraUSD lost its peg to the US dollar and sister coin luna eventually crashed to zero just five weeks after hitting a market cap of $41 billion, according to CoinGecko data. TerraUSD, or UST, was trading at around $0.09 on Friday.
The slide put a spotlight on algorithmic stablecoins whose values are set by a combination of computer codes and reserves to maintain a peg.
Administrators at Terraform Labs, the company behind the TerraUSD-luna crypto project, paused the network overnight and later resumed it, but luna still tumbled to a worthless value. The network was turned off in agreement with validators who oversee transactions. Terra was working on a network restoration plan, it said Thursday on Twitter.
In suspending trading, Binance CEO and founder Changpeng Zhao cited an "exponential amount" of new luna coins that were recently minted because of flaws in the design of the Terra protocol. Meanwhile, the network's suspension resulted in no deposits or withdrawals possible to or from any exchange, he added in a thread of posts on Twitter.
"Some of our users, unaware of the large amounts of newly minted LUNA outside the exchange, started to buy LUNA again, without understanding that as soon as deposits are allowed, the price will likely crash further. Due to these significant risks, we suspended trading," Zhao wrote.
Zhao said Binance's aim is to be neutral and that it typically refrains from commenting on other projects but that he was breaking that rule in the Terra situation.
"I am very disappointed with how this UST/LUNA incident was handled (or not handled) by the Terra team. We requested their team to restore the network, burn the extra minted LUNA, and recover the UST peg. So far, we have not gotten any positive response, or much response at all," Zhao wrote to his 5.9 million followers on Twitter.
He said that was in "sharp contrast" with the team behind online play-to-earn game Axie Infinity. Binance's work alongside Axie Infinity helped the exchange recover nearly $6 million from a North Korean group suspected to be behind a $620 million hack of the popular game.
