UST has caught the media’s attention for the wrong reasons in the past week. Terra’s stablecoin has lost its stability, and LUNA is suffering from it. Meanwhile, the largest crypto exchange in the world by market volume has stepped in to save Terra’s UST.
Binance exchanged removed liquidity for UST a day ago. The stablecoin tanked below $0.7 on Tuesday after a massive sell-off of the token. Arbitrage traders had the goal of capitalizing on this until Binance removed buy-liquidity for the token.
Unlike other stablecoins, UST is an algorithmic stablecoin. The token is connected to LUNA, the native token of Terra’s protocol. UST was designed such that 1 UST will always be equal to $1 of LUNA. This architecture is a two-edged sword that can benefit LUNA’s value and lead to a value crash.
Traders using Binance wanted to buy UST at a discount ($0.68), convert it to LUNA, then sell off the LUNA tokens for profit. However, Binance removed liquidity, and traders could not place buy orders on the exchange following the price chaos in the ecosystem.
This regulation did not prevent traders from profiting from the price tank on other CEXs and DEXs. Some Reddit users revealed that they were able to make tangible profits from the discount.
While Binance’s intervention seems to have curbed a little damage on Terra’s protocol, many users have thrown shades at the centralized exchange. The actions of Binance were likened to Robinhood, restricting retail traders from buying GMT stocks after “the big short” last year.
In the meantime, UST is valued at $0.65. Despite this massive fall, Binance users cannot place buy orders for the “stablecoin” below $0.7.
UST has also fallen down the market cap ranks. The asset surpassed BUSD’s market capitalization a few weeks back after exceeding the $17 billion mark. However, UST currently has a market cap of $4.6 billion, drifting more than 75% away from its peak.