@Katie-and-Becky0 Absolutely I'd cancel this booking. Unfortunately it might be really hard to contact Airbnb CS, as they just laid off a bunch of staff, and are short-handed for answering the phone, but maybe try to contact them on Twitter. If you just cancel on your own, you'll get penalized- what you want is for Airbnb to do a neutral cancellation, with no penalties to you. Tell them the guests lied to you about their intentions, that you were alerted by another Airbnb user that they were intending to throw a party and that you found their intended party advertised on Instagram. Screen shot it and have it handy to show Airbnb if needed. If the guests IBed and you haven't used up your 3 free cancellations, you could use one of those, stating you're uncomfortable with this reservation.
It isn't poor form to cancel a booking when the guest lied to you. And a lot smarter thing to do than waiting for a bunch of partygoers to invade your home and then trying to get them to leave, which could even be a threat to your safety if they get belligerant.