Intelligent design: stablecoins (in)stability and collateral during market turbulence

【Author】 De Blasis, Riccardo; Galati, Luca; Webb, Alexander; Webb, Robert I.

【Source】FINANCIAL INNOVATION

【影响因子】6.793

【Abstract】How does stablecoin design affect market behavior during turbulent periods? Stablecoins attempt to maintain a "stable" peg to the US dollar, but do so with widely varying structural designs. The spectacular collapse of the TerraUSD (UST) stablecoin and the linked Terra (LUNA) token in May 2022 precipitated a series of reactions across major stablecoins, with some experiencing a fall in value and others gaining value. Using a Baba, Engle, Kraft and Kroner (1990) (BEKK) model, we examine the reaction to this exogenous shock and find significant contagion effects from the UST collapse, likely partially due to herding behavior among traders. We test the varying reactions among stablecoins and find that stablecoin design differences affect the direction, magnitude, and duration of the response to shocks. We discuss the implications for stablecoin developers, exchanges, traders, and regulators.

【Keywords】Stablecoins; Herding; Information cascades; Volatility spillovers; Market crashes; Financial contagion

【发表时间】2023 6-May

【收录时间】2023-06-05

【文献类型】实验仿真

【主题类别】

区块链治理-市场治理-市场分析