From Billions to Broke: Binance’s LUNA Investment Tanks

Rachel Curry - Author
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May 17 2022, Published 11:35 a.m. ET

Powered by the Terra blockchain, stablecoin cryptocurrency LUNA is virtually worthless after depegging from the U.S. dollar. Worth just fractions of a cent as of May 17, LUNA has proven that stablecoins aren’t as stable as they claim. People have lost billions on their investments with little chance of recovery. So too have companies, including crypto exchange Binance.

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Binance went from billions to broke on its LUNA investment, but how low did the company’s stablecoin stash really drop?

Binance’s LUNA investment retreats to almost nothing from its $1.6 billion peak.

Major crypto exchange Binance had a reported enterprise value of $4.5 billion in early April, according to Barron’s. However, that number has likely dropped since Binance’s LUNA investment crashed.

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Binance invested $300 million into the Terra ecosystem in 2018. In exchange, it received 15 million LUNA tokens. At one point, the investment soared so high it was worth $1.6 million. Binance CEO Changpeng Zhao says Binance “never moved or sold” those tokens.

Since the collapse of the stablecoin, Binance’s LUNA investment has plummeted to near zero. As of May 16, Zhao said the company’s investment was worth $3,400. The Terra ecosystem has halted and LUNA’s chance of recovery is slim to none, which proves that stablecoins are a more volatile investment than many crypto companies led the public to believe.

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Despite drop, Binance’s LUNA investment might not be in the red.

Even though Binance lost nearly all of the $3 million in value on its original investment, the company may still have made out in the green. This is due to $10.3 million in rewards that Binance received. If the exchange was able to transfer enough in time to remain in the green on its cost basis, it’s all good. Zhao doesn’t seem to be phased either way, stating he had to check with his team to figure out where the company’s assets stand in regards to Luna and the Terra ecosystem as a whole.

Binance narrowly avoided a major pitfall.

Binance was reportedly nearing a deal to invest $300 million more into the Terra ecosystem as part of a $1 billion funding round. That deal never went through, which is good news for Zhao and his company.

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What did Binance CEO Changpeng Zhao have to say about the stablecoin collapse?

The fall of LUNA has influenced other stablecoins and cryptocurrencies. With the stock market also in the red and inflation continuing to fly high, it’s a volatile time for cryptocurrency — an already volatile asset class.

Zhao tweeted late on May 16, “Poor again.” Besides that, he added, “To lead by example on PROTECTING USERS, Binance will let this go and ask the Terra project team to compensate the [retail] users first, Binance last, if ever.”

Zhao also got a bit inspirational, writing, “I am just hoping that the project teams can rise from the ashes and rebuild in a proper and sensible way. Regardless of my personal views, or the solution chosen in the end, we will always be here to support the community in any way we can.”

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