Why Stablecoins Fail: An Economist’s Post-Mortem on Terra

Russell Wong

Richmond Fed Economic Brief, 2022, vol. 22, issue 24

Abstract: Why do some stablecoins, such as Terra's UST, fail but others do not? Was Terra just an unlucky victim of a classic bank run or speculative attack? Or was its high-yield deposit offering doomed to fail like a Ponzi scheme? What is the limit of the stablecoin's algorithm? What makes payment stable? In this article, we'll dive into potential answers to these questions about the failed stablecoin.

Keywords: cryptocurrency; terra; blockchain; stablecoin; liquidity (search for similar items in EconPapers)
Date: 2022
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