The platform behind the embattled luna cryptocurrency said Thursday afternoon it had temporarily halted its blockchain to stop transactions after the token’s price plummeted nearly 100% overnight, making the network more susceptible to a possible attack.
Shortly after 12 p.m. EDT, Terraform Labs announced on Twitter that the blockchain’s miners had decided to halt the Terra blockchain in order to “prevent governance attacks” following “severe [luna] inflation.”
In a separate tweet minutes later, Terra said validators are working to restart the network “in a few minutes.”
The move comes after Terra’s luna token collapsed in value, falling to less than a penny on Thursday afternoon despite trading at about $80 one week ago.
Fueling the recent weakness, sister asset TerraUSD, a so-called stablecoin meant to trade at about $1, broke its peg last weekend, falling to 36 cents and trading at less than 32 cents on Thursday; algorithms are meant to help keep TerraUSD at $1, but the token uses luna as a stabilizing mechanism when the price deviates.
Terraform did not immediately respond to Forbes‘ request for comment.
On Saturday, TerraUSD fell below $1 as concerns over the Federal Reserve looming interest-rate hikes and removal of pandemic-era stimulus pummeled the broader crypto market and pushed luna down about 10%. Despite vast attempts to reestablish the peg, TerraUSD has only collapsed further this week, feeding bearish sentiment. Bitcoin has tumbled nearly 19% over the past five days, while the broader cryptocurrency market has slipped below $1.3 trillion—down from a high above $3 trillion in November, according to CoinGecko.
Though it commanded a market capitalization of more than $40 billion in early April, luna is now worth just $82 million, according to CoinMarketCap.
On Thursday, the price of Tether, the world’s biggest stablecoin and a cornerstone of the cryptocurrency ecosystem, also slipped away from its $1 peg—falling as low as 94 cents before recovering by the afternoon. Unlike TerraUSD, Tether says its tokens are backed by actual currency, though it has been widely criticized for its lack of transparency over its holdings. Last year, the U.S. Commodity Futures Trading Commission fined Tether $41 million for making misleading statements about its reserves.
Crypto’s Long Night: Market Bleeds As LUNA Nears $0 (Forbes)
Unstable Stablecoin: How Crypto’s Crash Broke The Buck For TerraUSD (Forbes)
Tether Untethered: World’s Biggest Stablecoin Loses $1 Peg As Crypto Market Crashes (Forbes)