This is an interesting analysis. Setting aside for the moment the basic question of whether UST was structurally unsound, I've thought for a while now that the

This is an interesting analysis. Setting aside for the moment the basic question of whether UST was structurally unsound, I've thought for a while now that the slowness of on-chain transactions coupled with lack of liquidity are two of the most important differences between cryptos and real FX markets. This paper just shows how chronic this problem is. > During a seventy-five minute span on Saturday, May 7, a series of critical transactions first pushed UST off the peg. > At 21:44 GMT, Terraform Labs (TFL) withdrew $150 million in UST liquidity. > At 21:57, a relatively-inactive account ("Wallet A") swapped $85 million UST for USDC in this pool. (This was the largest swap transaction in that particular Curve pool ever.) > From 22:32 - 22:38, another account ("Wallet B") swapped $75 million UST in the pool across three transactions. By this point, the pool was severely imbalanced. > At 22:52, Terraform Labs withdrew another $100 million in UST liquidity. This made the pool slightly more balanced, but it was still heavily imbalanced and — more critically — tiny at this point, leaving it vulnerable to even small transactions. > At 22:59, Wallet B swapped another $25 million UST in the pool. So over 75 minutes, the curve pool wasn't able to absorb $435M of transactions. To put this in context a major FX cross eg (USD/GBP) will have trillions of dollars of liquidity at the touch (ie for immediate trading), with FX marketmakers responding in milliseconds to price movements. That liquidity has the effect of absorbing the market impact of trades so you would have to trade probably 10000x larger in size in order to make any kind of meaningful dent in the liquidity and even then the market would reach equilibrium again in milliseconds rather than hours/days/never as happened here.