Friday May 13, 2022

The seemingly endless freefall of Terra (LUNA) affected two decentralized finance (DeFi) protocols due to a price discrepancy, as the Chainlink price feed for LUNA gets suspended over extreme market conditions. 

Avalanche-based liquidity protocol Blizz Finance reported that as the price of LUNA was stuck at $0.10, attackers were able to deposit millions of LUNA to “borrow all the collateral.” As a result, Blizz Finance mentioned that its protocol was drained before its team could pause. The team apologized to those who were affected.

In an official statement, Venus Protocol explained that when Chainlink paused the LUNA price feed, the LUNA price on their platform remained at $0.107 while the market price was at $0.01. The platform reportedly lost $11.2 million because of the price suspension. However, the platform noted that it will utilize its risk fund to bring remedy to this shortfall. 

Betway MENA Sports $50 SOB banners

While it seems like the cause of the fiasco is the suspension of the Chainlink price feeds, some believe that the losses were due to the protocols’ negligence. Twitter user TheSoftwareJedi pointed out that Chainlink’s feeds have the tools necessary to avoid the problem and that it’s the protocols’ fault for not using them.

Related: Untethered: Here’s everything you need to know about TerraUSD, Tether and other stablecoins

Meanwhile, the Terra blockchain was halted as its token dropped by more than 99%. According to Terraform Labs, the blockchain network was discontinued to prevent governance attacks. However, its team coordinated to restart the network almost immediately.

See also  Terra LUNA's Price Drops Further Below $0.01 with 15 Billion Additional LUNA Issued

As LUNA continued to fall, crypto exchange Binance delisted its LUNA/Tether (USDT) pair. Taking precautionary measures, the exchange announced Thursday that it will delist the pair if the LUNA price goes below 0.005 USDT. LUNA has already fallen below that price point and is now trading at $0.000029 at the time of writing, according to coin information site CoinGecko.

Source

Leave a Reply

Your email address will not be published.