Study: the issue of stablecoins does not affect the price of crypto assets
The emission of stablecoins does not affect the prices of cryptocurrencies – research
Stablecoins don’t seem to be as influencing cryptocurrencies as many thought.
USDT offer does not affect Bitcoin price growth.
In the midst of cryptocurrency volatility, many investors prefer to use stablecoins as a rescue from turbulence.
How strongly the release of stablecoins could affect the growth of the price activity of bitcoin, as well as other cryptocurrencies in 2017, and did it affect at all?
Richard Lyons, Director of Innovation at the University of California, in collaboration with Ganesh Vishwanath-Natrai, Associate Professor of Finance at the University of Warwick School of Business, conducted a study on the impact of the supply of stablecoins on the price performance of cryptocurrency assets. [VOX]
As stablecoins – in literal translation from English “stable” coins – continue to gain popularity in the digital asset market. Since … More is regulated by a centralized issuer, then the supply of an asset can be increased at the request of this very body. Such centralization can lead to an inflationary impact on cryptocurrency prices, the study notes..
This is important because Tether Inc., the issuer of the stablecoin tether (USDT), is constantly accused of market manipulation. As of October 2019, a class action lawsuit filed against Tether alleging USDT is not backed by reserves at a 1: 1 dollar ratio.
The lawsuit also states that cryptocurrency exchange Bitfinex increased its USDT output during 2017, colluding with the issuer to manipulate the price of bitcoin..
However, according to the study, the supply of stablecoins not only did not affect the growth of bitcoin, but, on the contrary, influenced the fall in the price of a well-known crypto-asset. It is also noteworthy that in the case of ether, everything happens exactly the opposite: with an increase in USDT emission, the ETH rate rises.
Price deviation amid the release of new USDT. Gray shows the direction of the trend and the average volatility of the asset.
After examining most of the new USDT releases, Lions and Vishwanath-Natraj concluded that stablecoins had little or no effect on the growth of major cryptocurrencies. The same applies to 2017, when Bitcoin experienced a phenomenal cryptocurrency rally..
However, the researchers do not exclude the possibility that price manipulation could have occurred in 2017, although based on aggregate data, the emission of stablecoins did not affect the price in any way..
According to the study, stablecoins rather work as a decentralized exchange rate peg system, which is used in some cases..
One such case is the purchase of a stablecoin as a transportation currency. In times of risk, some investors choose to switch from cryptocurrencies to more reliable assets. These are exactly what stablecoins are..
During the Bitcoin crash in January and February 2018, the price for 1 USDT jumped up to $ 1.05. The premium five cents were paid extra in the secondary market, which led to the outflow of bitcoin in favor of USDT.
Similar cases of premium payments for USDT and other stablecoins were recorded during the Covid-19 panic in March 2020, when the bitcoin price fell by more than 30% in just a day..
Researchers have not been able to find evidence that the issuance of stablecoins is driving the price of cryptocurrencies higher. Nevertheless, Lyons and Vishwanath-Natraj concluded that today stablecoins play a significant role in the circulation of digital assets as a safe haven..
What do you think? Is the issue of stablecoins really not affecting Bitcoin? Share with us with our thoughts in the comments.
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