The decentralized finance (DeFi) protocol to Venus has been added to the long list of people affected by the collapse of the Terra ecosystem this week.
The Venus Protocol has been hit hard by the fall in the price of the LUNA token. On May 13, the DeFi platform made an announcement stating that it had lost several million dollars due to a price discrepancy on the platform. Venus BNB is a decentralized algorithmic money market protocol on chain.
The protocol gets its price feed from the Chainlink oracle, which is where the problems started. Chainlink suspended the price feed due to extreme market conditions with the LUNA token.
It added that the price of LUNA on Venus was last listed at around $0.107, however, the market price at that time was closer to $0.01. “To risk this situation, the protocol was circumvented using PosGuardian via Multisig,” it said.
Venus protocol suspension
Venus reported that upon investigation it was found that two large deposits of LUNA were at the wrong price that were used to borrow assets on the platform.
“Upon this desyncing event, it was discovered that 2 accounts had suspiciously accumulated an amount of 230,000,000 LUNA worth over $24,000,000. The assets were borrowed approximately $13,500,000.”
Industry Analyst Colin Wu Confirmed That the protocol lost $11.2 million due to the suspension of Chainlink’s LUNA price updates.
Venus suspended protocol, saying it has a “risk fund” that will be used to cover shortfalls from the event.
It added that a proposal to restart the system was initiated and it would resume operations in 48 hours. All liquidity is still contained within the protocol and there will be no liquidations during this period, it confirms.
According to Defilama, the total value of the Venus Protocol is approximately $1 billion and it is the second largest platform on the Binance Chain. TVL has dumped 28% in the last 24 hours due to the incident, however further withdrawals have now been suspended.
XVS Price Feedback
Contrary to expectations, the protocol’s native token XVS is actually up 26% over the past 24 hours. At press time, XVS was trading at $4.17 according to CoinGecko.
However, XVS has lost a whopping 45% in the past week during the broader crypto market downturn. The coin is now a painful 97% down from its May 2021 all-time high of $147.
Meanwhile, LUNA has become one of the few crypto assets to seal a 100% loss from its peak to zero.