Evaluating only Anchor Protocol’s profile at its peak — without knowing the outcome — the model ranked Fraud as the #1 likely cause. Documented cause: Market collapse.
Key Events Timeline
FOUNDING
Anchor Protocol founded on Terra blockchain by Terraform Labs to offer savings functionality.
PRODUCT LAUNCH
Anchor Protocol launches with a fixed 19.5% annual yield on UST deposits, attracting early adopters.
DOWN ROUND
Terraform Labs injects $450 million into Anchor's reserve to sustain the 19.5% yield amid depletion.
FUNDING
Anchor Protocol reaches peak with $17 billion in UST deposits locked in the protocol.
REGULATORY ACTION
UST stablecoin loses its peg to the dollar as reserve depletions trigger loss of confidence in May 2022.
SHUTDOWN
Sudden collapse: Anchor Protocol ceases operations, destroying approximately $40 billion in total market value within days.
Full Analysis
Free · no account needed
Documented cause
Anchor Protocol was a savings protocol on the Terra blockchain built by Terraform Labs that offered a fixed 19.5% annual yield on deposits of UST (TerraUSD stablecoin). At its peak in March 2022, Anchor held $17 billion in UST deposits. The yield was fundamentally unsustainable: Anchor was burning through its reserve at approximately $5 million per day in early 2022. In February 2022, Terraform Labs injected $450 million into the reserve to sustain the 19.5% rate. The high yield created a self-reinforcing loop: the yield drove demand for UST, which drove demand for LUNA. When the yield reserve drained, a loss of confidence in UST triggered a depeg in May 2022. The resulting death spiral destroyed approximately $40 billion in total market value within days.
Lesson
“A 19.5% fixed yield on a stablecoin that is also the collateral for a separate algorithmic mint is not a yield product. It is a confidence mechanism whose collapse will be proportional to the confidence it created.”