Crisis Response Strategies During Cryptocurrency Crash: A Netnographic Studies of Lunatics Community

Abstract

Cryptocurrency is a speculative investment due to its volatility which could result in significant returns but also could end in crashes. Terra blockchain collapsed when its stable coin UST failed to maintain its peg to 1 USD and caused its sister coin LUNA to drop by more than 90% only in a few days. Terra LUNA itself has gained success and attracted many investors that became a strong community called Lunatics. Using Netnography; this study tried to observe crisis response strategies from Do Kwon, founder and CEO of Terraform Labs, and from Terra LUNA official Twitter account during the crash. Also, this study used community sentiment as an indicator to measure the success of the strategies. In addition, this study observed the interaction of the community during the crash period and how they overcome the crisis together. The results show that mortification and corrective action are the most effective strategy to generate positive sentiment. However, denials toward rumors cause more negative sentiment within the community. Despite the recovery plan from the Terra network, the Lunatics community also has its ways of recovering from the crisis. This study also revealed that community influencers' roles are crucial in controlling rumors during the crisis.

Fancies explained

“…Their evolution has come a long way from the first cryptocurrency, Bitcoin, and Ethereum, the first major blockchain platform that runs on the second largest cryptocurrency, Ether, to multi-layered (over-)complicated platforms for decentralized finances, or DeFi. DeFi platforms can be used for high-risk investments and eventually for massive financial fraud, as the examples of Luna, Celsius (S. Lee, Lee, & Lee, 2022;Gechev, 2022;Tjahyana, 2022), and FTX have demonstrated recently. The topic of this article is 'decentralized' gaming realized on a blockchain in a rather similar way, although with much less detrimental consequences, safeguarded to some extent by their obvious playfulness.…”