On the Stability of Stablecoins
Copyright policy )On the Stability of Stablecoins
This paper investigates the volatility processes of stablecoins and their potential stochastic interdependencies with Bitcoin volatility. We employ a novel approach to choose the optimal combination for the power law exponent and the minimum value for the volatilities bending the power law. Our results indicate that Bitcoin volatility is well-behaved in a statistical sense with a finite theoretical variance. Surprisingly, the volatilities of stablecoins are statistically unstable and contemporaneously respond to Bitcoin volatility. Also, whereas the volatilities of stablecoins are not Granger-causal for Bitcoin volatility, lagged Bitcoin volatility exhibits Granger-causal effects on the volatilities of stablecoins. We conclude that Bitcoin volatility is a fundamental factor in the valuation of stablecoins.
- University of Jyväskylä Finland
- University of Vassa Finland
- University of Vaasa Finland
- The University of Texas System United States
- Texas A&M University United States
fi=Laskentatoimi ja rahoitus|en=Accounting and Finance|, volatility (societal properties), stablecoins, ta511, markkina-arvo, Economics, Päätöksentekoa tukeva taloustiede ja talouden kilpailukyky (painoala), School of Resource Wisdom, Spillovers, Power laws, Resurssiviisausyhteisö, virtuaalivaluutta, Financial technology, volatiliteetti, Volatility, financial technology, markkinat (taloustiede), Stablecoins, spillovers, Policy-Relevant Economics and Competitiveness of Economy (focus area), Taloustiede, power laws, Bitcoin
fi=Laskentatoimi ja rahoitus|en=Accounting and Finance|, volatility (societal properties), stablecoins, ta511, markkina-arvo, Economics, Päätöksentekoa tukeva taloustiede ja talouden kilpailukyky (painoala), School of Resource Wisdom, Spillovers, Power laws, Resurssiviisausyhteisö, virtuaalivaluutta, Financial technology, volatiliteetti, Volatility, financial technology, markkinat (taloustiede), Stablecoins, spillovers, Policy-Relevant Economics and Competitiveness of Economy (focus area), Taloustiede, power laws, Bitcoin
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