The work investigates the relationship between stablecoins and major cryptoassets, finding that stablecoins do not boost the prices of other cryptoassets. Instead, stablecoin issuances respond to price changes in other cryptoassets, indicating a reflection of demand for investment in cryptomarkets.
This informs the topic of stablecoin interactions with cryptoasset prices.
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| Methodology | generalized vector autoregressive framework and directed spillovers |
Abstract Stablecoins and their leader Tether have been one of the controversial topics of cryptomarkets and their role in price rallies of the past few years has been questioned repeatedly. Using the generalized vector autoregressive framework and directed spillovers based on the forecast error variance decompositions, we find no evidence of stablecoins boosting the prices of other cryptoassets. On the contrary, the increased stablecoins issuances come in reaction to the other cryptoassets price changes, which suggests they rather reflect increasing demand in investing into the cryptomarkets that gets materialized in demand for the “digital fiat”.
Ladislav Krištoufek (2021). Tethered, or Untethered? On the interplay between stablecoins and major cryptoassets Finance research letters.
@article{toufek2021tethereduntetheredinterplaybetween,
title = {Tethered, or Untethered? On the interplay between stablecoins and major cryptoassets},
author = {Ladislav Krištoufek},
year = {2021},
institution = {Elsevier BV},
journal = {Finance research letters},
doi = {10.1016/j.frl.2021.101991},
url = {https://doi.org/10.1016/j.frl.2021.101991},
note = {Indexed by Stablecoin Beat},
}