Anatomy of a Stablecoin’s failure: The Terra-Luna case

Antonio Briola, David Vidal-Tomás, Yuanrong Wang and Tomaso Aste

Finance Research Letters, 2023, vol. 51, issue C

Abstract: We quantitatively describe the main events that led to the Terra project’s failure in May 2022. We first review, in a systematic way, news from heterogeneous social media sources; we discuss the fragility of the Terra project and its vicious dependence on the Anchor protocol. We hence identify the crash’s trigger events, analysing hourly and transaction data for Bitcoin, Luna, and TerraUSD. Finally, using state-of-the-art techniques from network science, we study the evolution of dependency structures for 61 highly capitalised cryptocurrencies during the down-market and we also highlight the absence of herding behaviour analysing cross-sectional absolute deviation of returns.

Keywords: Stablecoin; Cryptocurrency; LUNA; UST; Network science; Herding (search for similar items in EconPapers)
JEL-codes: G10 G11 G40 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:51:y:2023:i:c:s1544612322005359

DOI: 10.1016/j.frl.2022.103358

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