Unveiling the Truth About Stablecoins in Crypto Market #sciencefather #researcher #cryptomarket

 

Can Stablecoins Truly Anchor the Volatile Crypto Market?

In the fast-changing 🌪️ world of cryptocurrencies, the idea of using stablecoins as market anchors has gained huge attention. But are they truly stable, independent, and resilient enough to play this role? This study dives deep into that question using an innovative, three-dimensional framework.

📌 Purpose of the Study

This research empirically examines the potential of stablecoins to act as anchors in the volatile cryptocurrency market. The framework evaluates them on three key dimensions:
1️⃣ Stability – How much they maintain value consistency.
2️⃣ Independence – How free they are from the influence of other assets.
3️⃣ Resilience – How well they withstand and recover from market shocks.

💱 Assets Analyzed

The study compares:

• Stablecoins: Tether (USDT), USD Coin (USDC), Binance USD (BUSD)

• Top Unpegged Cryptos: Bitcoin (BTC), Ethereum (ETH), Binance Coin (BNB)

• Major Fiat Currencies (after USD): Euro (EUR), Japanese Yen (JPY), British Pound (GBP) – all USD-denominated 💵

🛠️ Methodology

To assess stability, independence, and resilience, three advanced methods were used:
🔹 Granger Causality – Tests predictive relationships between assets.
🔹 ADCC-GARCH (Asymmetric Dynamic Conditional Correlation) – Measures volatility spillover and correlations 📈.
🔹 Transfer Entropy – Captures nonlinear relationships and information flows.

For resilience, market liquidity was measured using:
💧 Turnover Ratio weighted by Market Cap
📚 Abdi & Ranaldo (2017) Method

📊 Key Findings

❌ Stablecoins are not consistently more stable, independent, or resilient than other assets.
⚠️ Significant volatility spillovers exist between stablecoins, unpegged cryptos, and fiat currencies.
🤔 The idea that stablecoins could become a reliable private alternative to fiat currency is questionable.

📢 Implications

These findings challenge the perception of stablecoins as safe havens in crypto markets. While they can reduce volatility in certain contexts, their vulnerability to broader market dynamics limits their role as robust anchors.

🏁 Conclusion

Stablecoins may not yet be the financial lifeboats 🌊 many hoped for. To serve as true anchors, they must demonstrate greater independence from crypto volatility, higher liquidity resilience, and consistent stability in diverse market conditions.

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