Anatomy of a Stablecoin’s failure: The Terra-Luna case
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 c...
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| Published in | Finance research letters Vol. 51; p. 103358 |
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| Main Authors | , , , |
| Format | Journal Article |
| Language | English |
| Published |
Elsevier Inc
01.01.2023
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| Subjects | |
| Online Access | Get full text |
| ISSN | 1544-6123 1544-6131 |
| DOI | 10.1016/j.frl.2022.103358 |
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| 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.
•We describe the Terra project’s features and the mechanisms that led to its failure.•We use network science and herding approaches to capture dependency structures.•The vicious dependence of the Terra project on the Anchor protocol is reported.•We uncover BTC’s reference role during the first phase of the collapse.•Herding behaviour is not detected during the down market. |
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| AbstractList | 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.
•We describe the Terra project’s features and the mechanisms that led to its failure.•We use network science and herding approaches to capture dependency structures.•The vicious dependence of the Terra project on the Anchor protocol is reported.•We uncover BTC’s reference role during the first phase of the collapse.•Herding behaviour is not detected during the down market. |
| ArticleNumber | 103358 |
| Author | Wang, Yuanrong Vidal-Tomás, David Aste, Tomaso Briola, Antonio |
| Author_xml | – sequence: 1 givenname: Antonio surname: Briola fullname: Briola, Antonio organization: Department of Computer Science, University College London, Gower Street, WC1E 6EA, London, United Kingdom – sequence: 2 givenname: David surname: Vidal-Tomás fullname: Vidal-Tomás, David email: d.vidal@ucl.ac.uk organization: Department of Computer Science, University College London, Gower Street, WC1E 6EA, London, United Kingdom – sequence: 3 givenname: Yuanrong surname: Wang fullname: Wang, Yuanrong organization: Department of Computer Science, University College London, Gower Street, WC1E 6EA, London, United Kingdom – sequence: 4 givenname: Tomaso surname: Aste fullname: Aste, Tomaso organization: Department of Computer Science, University College London, Gower Street, WC1E 6EA, London, United Kingdom |
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| Title | Anatomy of a Stablecoin’s failure: The Terra-Luna case |
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