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The Terra-Luna Collapse and the Role of the Anchor Protocol: A Bird’s Eye View of the Crash
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dc.contributor.authorChoi, Jaewon-
dc.contributor.authorWang, Shu Feng-
dc.date.issued2024-11-01-
dc.identifier.issn2713-6531-
dc.identifier.urihttps://aurora.ajou.ac.kr/handle/2018.oak/34651-
dc.identifier.urihttps://www.scopus.com/inward/record.uri?partnerID=HzOxMe3b&scp=85211372164&origin=inward-
dc.description.abstractThis paper explorers the contributing factors to the Terra (UST)-Luna crash in May 2022. We argue that the crash was primarily fueled by the unsustainable interest rates offered by the Anchor Protocol. Initially, Terra was designed to facilitate fee-free payments and ensure stability through a diversified demand base from payment services. However,www.earticle.net the launch of the Anchor Protocol in 2021, with its 19.45% interest rate, shifted UST's focus towards speculative demand. This change led to an unsustainable increase in UST's supply, ultimately triggering a run from Terra. We discuss flaws in the governance mechanism for setting Anchor Protocol's interest rates. The exorbitant yield offered by the Anchor Protocol significantly contributed to undermining Terra's long-term stability. The speculative demand incited by the Anchor Protocol's high interest rates was likely a major factor in the Terra collapse in May 2022.-
dc.description.sponsorshipThis work was supported by the New Faculty Startup Fund from Seoul National University.-
dc.language.isoeng-
dc.publisherKorean Finance Association-
dc.titleThe Terra-Luna Collapse and the Role of the Anchor Protocol: A Bird’s Eye View of the Crash-
dc.typeArticle-
dc.citation.endPage32-
dc.citation.number4-
dc.citation.startPage1-
dc.citation.titleAsian Review of Financial Research-
dc.citation.volume37-
dc.identifier.bibliographicCitationAsian Review of Financial Research, Vol.37 No.4, pp.1-32-
dc.identifier.doi10.37197/arfr.2024.37.4.1-
dc.identifier.scopusid2-s2.0-85211372164-
dc.identifier.urlhttp://journal.korfin.org/journal/download.php?key=D/YXCLIeEmI=-
dc.subject.keywordCryptocurrency-
dc.subject.keywordDecentralized Savings Protocol-
dc.subject.keywordFinancial fragility-
dc.subject.keywordStablecoin-
dc.subject.keywordTerra(UST)-Luna Crash-
dc.type.otherArticle-
dc.identifier.pissn1229-0351-
dc.description.isoafalse-
dc.subject.subareaFinance-
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