Journal article · 2022

The instability of stablecoins

Kun Duan, Andrew Urquhart · Finance research letters · Elsevier BV

This paper examines the stability of the five largest stablecoins by market capitalization using fractional time series analysis. It finds strong evidence of instability among these stablecoins, with varying correction speeds.

Read the source ↗ · DOI

Research questionWhat is the stability of the five largest stablecoins in terms of market capitalization?

MethodologyFractional time series analysis using hourly data.

Data / sampleHourly data of Tether, USDC, Binance USD, DAI, and PAX Dollar.

Constructsstability of stablecoins; market capitalization; correction speed; co-movement

Key findings

There is strong evidence of instability of stablecoins.
Deviations from the $1 mark are gradually corrected at different speeds for all stablecoins except for DAI.
DAI's deviations do not converge in the long-run due to non-stationarity.
BUSD is the most stable stablecoin with the fastest correction speed.

Topics: Market Structure & Adoption

Cite this

Kun Duan, Andrew Urquhart (2022). The instability of stablecoins Finance research letters.

BibTeX

@article{duan2022instabilitystablecoins,
  title = {The instability of stablecoins},
  author = {Kun Duan and Andrew Urquhart},
  year = {2022},
  institution = {Elsevier BV},
  journal = {Finance research letters},
  doi = {10.1016/j.frl.2022.103573},
  url = {https://doi.org/10.1016/j.frl.2022.103573},
  note = {Indexed by Stablecoin Beat},
}

Indexed by Stablecoin Beat — we link to and summarise sources; we do not host copyrighted full text, and summaries are our own. · All research · Methodology