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Do asset-backed stablecoins spread crypto volatility to traditional financial assets? Evidence from Tether

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  • Wu, Gabriel Shui Tang
  • Leung, Pak Ho

Abstract

This study shows empirically how Tether, the largest asset-backed stablecoins, magnifies the volatility spillover from crypto assets to money market instruments through its reserve adjustments. Our finding supports the need of strengthening the disclosure by and liquidity management of stablecoins.

Suggested Citation

  • Wu, Gabriel Shui Tang & Leung, Pak Ho, 2023. "Do asset-backed stablecoins spread crypto volatility to traditional financial assets? Evidence from Tether," Economics Letters, Elsevier, vol. 229(C).
    • Handle: RePEc:eee:ecolet:v:229:y:2023:i:c:s0165176523002380
    DOI: 10.1016/j.econlet.2023.111213
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    More about this item

    Keywords

    Crypto assets; Money market; Stablecoins; Spillover;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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