Leverage and Stablecoin Pegs

⚠ The summary and findings below are the editor's working notes, pending verification against the source.

Analyses how leverage and secondary-market liquidity determine whether a stablecoin holds its peg.

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Key findings

• A stablecoin holds its peg when arbitrageurs can profitably trade it back to par; deep liquidity is key.
• Leverage built on stablecoins can amplify depeg dynamics.

Topics: Peg Stability & Runs · DeFi & Collateral

Cite this

Gary B. Gorton, Chase P. Ross, Sharon Y. Ross (2022). Leverage and Stablecoin Pegs NBER Working Paper 30796.

@techreport{gorton2022leveragestablecoinpegs,
  title = {Leverage and Stablecoin Pegs},
  author = {Gary B. Gorton and Chase P. Ross and Sharon Y. Ross},
  year = {2022},
  institution = {NBER},
  howpublished = {NBER Working Paper 30796},
  url = {https://www.nber.org/papers/w30796},
  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