Binance CEO Changpeng Zhao has weighed in on the collapse of the stablecoin TerraUSD (UST) and its related token Luna (LUNA).
“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,” he said on Twitter.
Zhao also explained why Binance decided to freeze trading of both tokens.
“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,” he said.
The tokens collapsed when UST lost its peg to the US dollar, putting incredible pressure on Luna to keep its price up. Due to the way the two tokens were designed to interact, this led to a huge supply increase for Luna and a resultant price crash. Luna’s supply increased from 340 million to 6.5 trillion in just a few days. At the same time, its price crashed from $60 to a fraction of a cent.