On Using Twitter to Understand the Stablecoin Terra Collapse

Stablecoins have emerged as a solution to the legal status and volatile exchange rate issues surrounding cryptocurrencies like Bitcoin. Terra is a blockchain protocol that enables the creation of stablecoins pegged to fiat currencies, including UST and KRT, which have gained popularity for their use in DeFi applications. However, in May 2022, TerraUSD (UST) lost its peg to the USD, collapsing to a value of 0.091 USD due to a massive withdrawal of UST from the Anchor Protocol, leading to a sharp drop in price. In this paper we analyze people's opinions and thoughts about the topic using Twitter data and we propose a method to identify the accounts that acted as opinion leaders. We observed an increase in negativity in the month leading up to the collapse and identified the United States as the most prolific country in terms of tweets; we identified opinion leaders accounts and we showed that the number of followers is not an important metric to identify opinion leaders. The failure of the Terra project highlights the intrinsic fragility of algorithmic stablecoins, which can fail due to sudden fluctuations in demand and supply, and their potential for success and stability remains uncertain.