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Anatomy of a stablecoin's failure: the Terra-Luna case

Briola, Antonio, Vidal-Tomás, David, Wang, Yuanrong and Aste, Tomaso (2023) Anatomy of a stablecoin's failure: the Terra-Luna case. Finance Research Letters, 51. ISSN 1544-6123

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Identification Number: 10.1016/j.frl.2022.103358

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.

Item Type: Article
Official URL: https://www.sciencedirect.com/journal/finance-rese...
Additional Information: © 2022 Elsevier Inc.
Divisions: Systemic Risk Centre
Subjects: H Social Sciences > HG Finance
JEL classification: G - Financial Economics > G1 - General Financial Markets > G10 - General
G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice; Investment Decisions
Date Deposited: 21 Oct 2022 12:36
Last Modified: 26 May 2024 07:00
URI: http://eprints.lse.ac.uk/id/eprint/117147

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