Journal article · 2022

Stablecoins as a tool to mitigate the downside risk of cryptocurrency portfolios

Antonio Díaz, Carlos Esparcia, Diego Huélamo · The North American Journal of Economics and Finance · Elsevier BV

This paper empirically assessed the ability of three stablecoins to mitigate the downside risk of a traditional cryptocurrency portfolio. The findings indicated that dollar-backed stablecoins are particularly suitable as a hedge for crypto investors.

Read the source ↗ · DOI

Research questionHow do stablecoins mitigate the downside risk of cryptocurrency portfolios?

MethodologyEmpirical assessment with a monthly rebalance experiment.

Data / sampleOut-of-sample period.

Constructsdownside risk; stablecoins; cryptocurrency portfolios

Key findings

Dollar-backed stablecoins have low conditional correlations with cryptocurrency portfolios.
All stablecoins considered have high diversification capacities by systematically reducing portfolio tail risk.

Topics: Regulation & Policy · Peg Stability & Runs · DeFi & Collateral

Cite this

Antonio Díaz, Carlos Esparcia, Diego Huélamo (2022). Stablecoins as a tool to mitigate the downside risk of cryptocurrency portfolios The North American Journal of Economics and Finance.

BibTeX

@article{az2022stablecoinstoolmitigatedownside,
  title = {Stablecoins as a tool to mitigate the downside risk of cryptocurrency portfolios},
  author = {Antonio Díaz and Carlos Esparcia and Diego Huélamo},
  year = {2022},
  institution = {Elsevier BV},
  journal = {The North American Journal of Economics and Finance},
  doi = {10.1016/j.najef.2022.101838},
  url = {https://doi.org/10.1016/j.najef.2022.101838},
  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