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

• Main Authors: Briola, Antonio, Vidal-Tomás, David, Wang, Yuanrong, Aste, Tomaso
• Format: Journal Article
• Language: English
• Published: 25-09-2022
• Subjects: Computer Science - Social and Information Networks; Quantitative Finance - General Finance; Quantitative Finance - Statistical Finance
• DOI: 10.48550/arxiv.2207.13914

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.