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The influence of stablecoin issuances on cryptocurrency markets

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  • Ante, Lennart
  • Fiedler, Ingo
  • Strehle, Elias

Abstract

Stablecoins are digital currencies that are pegged to non-volatile assets. As alternatives to fiat currencies, they constitute an important aspect of cryptocurrency markets. We analyze returns of cryptocurrencies around 565 stablecoin issuances events for seven different stablecoins between April 2019 and March 2020. Our event study reveals market downturns in the week before issuance and positive abnormal returns in the twenty-four hours around the issuance. Effects differ and remain insignificant for some stablecoin subsamples and issuance size does not significantly affect the abnormal returns. We conclude that stablecoin issuances contribute to price discovery and market efficiency of cryptocurrencies.

Suggested Citation

  • Ante, Lennart & Fiedler, Ingo & Strehle, Elias, 2021. "The influence of stablecoin issuances on cryptocurrency markets," Finance Research Letters, Elsevier, vol. 41(C).
    • Handle: RePEc:eee:finlet:v:41:y:2021:i:c:s1544612320316810
    DOI: 10.1016/j.frl.2020.101867
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    Cited by:

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    2. Chen, Xia & Miraz, Mahadi Hasan & Gazi, Md. Abu Issa & Rahaman, Md. Atikur & Habib, Md. Mamun & Hossain, Abu Ishaque, 2022. "Factors affecting cryptocurrency adoption in digital business transactions: The mediating role of customer satisfaction," Technology in Society, Elsevier, vol. 70(C).
    3. Łęt, Blanka & Sobański, Konrad & Świder, Wojciech & Włosik, Katarzyna, 2023. "What drives the popularity of stablecoins? Measuring the frequency dynamics of connectedness between volatile and stable cryptocurrencies," Technological Forecasting and Social Change, Elsevier, vol. 189(C).
    4. Patel, Ritesh & Migliavacca, Milena & Oriani, Marco E., 2022. "Blockchain in banking and finance: A bibliometric review," Research in International Business and Finance, Elsevier, vol. 62(C).
    5. Ravi Kashyap, 2023. "DeFi Security: Turning The Weakest Link Into The Strongest Attraction," Papers 2312.00033, arXiv.org.
    6. Bojaj, Martin M. & Muhadinovic, Milica & Bracanovic, Andrej & Mihailovic, Andrej & Radulovic, Mladen & Jolicic, Ivan & Milosevic, Igor & Milacic, Veselin, 2022. "Forecasting macroeconomic effects of stablecoin adoption: A Bayesian approach," Economic Modelling, Elsevier, vol. 109(C).
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    10. Saggu, Aman, 2022. "The Intraday Bitcoin Response to Tether Minting and Burning Events: Asymmetry, Investor Sentiment, and “Whale Alerts” on Twitter," Finance Research Letters, Elsevier, vol. 49(C).
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    More about this item

    Keywords

    market efficiency; price discovery; asset pricing; tether; bitcoin; ethereum;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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