Terra validators halted the blockchain mining at block 7607789 after the cryptocurrency fell 99% to be traded at 98.5% down, based on the data published by CoinMarketCap. Validators are drawing a plan to reconstitute the blockchain.
TerraUSD, or UST, fell early morning Friday due to the algorithmic stablecoin de-pegging debacle. A devaluation of the US Dollar is believed to be the root cause behind the fall of the cryptocurrency by such a considerable margin.
The US Dollar fell from $1 to $0.68 on May 09, 2022. Following this, UST fell as it is pegged to the US Dollar.
Validators are yet to confirm if TerraUSD will resume its peg with the currency. Effects of the fall have begun resurfacing in the market, with many users opting for a short sale of their holdings to exchange them for a competing stablecoin. The UST Curve Pool is dwindling in the process.
LUNA has witnessed collateral damage as its price fell, forcing Terra to mint more LUNA to compensate for the negative price pressure.
TerraUSD and LUNA are connected. The survival of the ecosystem of UST is heavily dependent on its adoption, and LUNA invests funds in crypto to establish the peg. LUNA loses money if the demand for UST rises, and it feels the effects of long-term deflation with improvements like Columbus-5.
LUNA also gets affected if UST is identified as unstable in the market. Terra shared the update of halting the blockchain on its official Twitter handle by publishing a Tweet that said it had officially halted at block 7607789. The validators suspended the blockchain to devise a plan to rebuild it. More updates are awaited from Terra.
Terra Community did not respond well to the update. Kenboi_Ninja, a user, left a message in its Discord community saying that Terra needed to bring in the A-Team composed of people who understood what was happening.
The message also stated that Terra validators needed Sean Connery as anything was possible with the right people in the space and good ideas and capital.
Users have currently been restricted to one message per hour in the Discord Community of the blockchain. At the time of halting, LUNA was priced at $0.008 and UST at $0.19.
The plug has been temporarily pulled by validators causing a not so permanent fall in the price. Once validators develop a plan to resolve the blockchain, prices may climb up to a better value, generate returns, and offer stability.
Cryptocurrency carries high volatility; however, stablecoin does not. They act as a perfect alternative for people looking to get on board with digital currency safely. Prices are currently low, and the situation is dark, and both are expected to improve later.