We are delighted to announce the next seminar in the series - Micro and Macro Implications of Household Behaviour and Financial Decision-Making.

The seminar will run from 3:30 to 5:00 pm (GMT) on Friday 16 February.

Antoinette Schoar presenting "Anatomy of a run: the Terra Luna crash" with discussion by Quentin Vandeweyer and Ganesh Viswanath-Natraj

Abstract: Terra, the third largest cryptocurrency ecosystem after Bitcoin and Ethereum, collapsed in three days in May 2022 and wiped out $50 billion in valuation. At the center of the collapse was a run on a block chain-based borrowing and lending protocol (Anchor) that promised high yields to its stablecoin (UST) depositors. Using detailed data from the Terra blockchain and trading data from exchanges, we show that the run on Terra was a complex phenomenon that happened across multiple chains and assets. It was unlikely due to concentrated market manipulation by a third party but instead was precipitated by growing concerns about the sustainability of the system. Once a few large holders of UST adjusted their positions on May 7th, 2022, other large traders followed. Blockchain technology allowed investors to monitor each other's actions and amplified the speed of the run. Wealthier and more sophisticated investors were the first to run and experienced much smaller losses. Poorer and less sophisticated investors ran later and had larger losses. The complexity of the system made it difficult even for insiders to understand the build up of risk. Finally, we draw broader lessons about financial fragility in an environment where a regulatory safety net does not exist, pseudonymous transactions are publicly observable, and market participants are incentivized to monitor the financial health of the system.

Register to receive the Zoom Link here.

Further details can be found on the Seminar Webpage here

Richard Blundell
Adrien Couturier
Michael Haliassos
Christopher Hansman
Yigitcan Karabulut
Peter Levell
Clara Martinez-Toledano
Benjamin Moll
Tarun Ramadorai
Xiao Yin