Leverage and Stablecoin Pegs

Gary B. Gorton, Chase P. Ross, Sharon Y. Ross · NBER Working Paper 30796 unverified · NBER

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

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Relevance to stablecoin measurement

Theory linking peg stability to DeFi leverage; supports peg + DeFi coverage.

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.

Indexed under

Peg Stability & Runs DeFi & Collateral

Related Stablecoin Beat data

Peg Stability

Cite this

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

BibTeX

@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},
}

Figures marked unverified are recorded but not yet independently confirmed.

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