- A new study has found that stablecoins operate as tools for investors to react to the market and do not influence crypto prices.
- The analysis of trade data indicates flows are consistent with investors using stablecoins as a store of value during periods of risk.
- The research findings directly contradict an earlier study conducted in July 2018.
Recent research has revealed that stablecoins act as tools for investors to react to market movements and do not impact price inflation or collapse. The research was funded by the University of California Berkeley’s Haas Blockchain Initiative and was conducted by Richard Lyons, UC Berkley’s chief innovation and entrepreneurship officer, and Ganesh Viswanath-Natraj, assistant professor of finance at the Warwick Business School.
The analysis of trade data indicates flows are consistent with investors using stablecoins as a store of value during price depreciation or periods of risk. The researchers also found “strong evidence” of another catalyst for flows from issuer treasuries to secondary markets: arbitrage trading when stablecoins deviate from their pegs.
The impact of stablecoin issuances on the price of crypto has been debated for a long time. Back in July 2018, research by John Griffins of the University of Texas at Austin and Amin Shams of the Ohio State University concluded that stablecoin issuances “are timed following market downturns and result in sizable increases in bitcoin prices.” It also claimed that stablecoin flows and subsequent price inflation in 2017 could be attributed to one entity.
Contradicting these study findings, Lyons and Viswanath-Natraj summarize their conclusions by saying:
We find no systematic evidence that stablecoin issuance affects cryptocurrency prices. Rather, our evidence supports alternative views; namely, that stablecoin issuance endogenously responds to deviations of the secondary market rate from the pegged rate, and stablecoins consistently perform a safe-haven role in the digital economy.
Share
