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On the role of stablecoins in cryptoasset pricing dynamics

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  • Ladislav Kristoufek

    (Charles University
    The Czech Academy of Sciences)

Abstract

We examine the interactions between stablecoins, Bitcoin, and a basket of altcoins to uncover whether stablecoins represent the investors’ demand for trading and investing into cryptoassets or rather play a role as boosting mechanisms during cryptomarkets price rallies. Using a set of instruments covering the standard cointegration framework as well as quantile-specific and non-linear causality tests, we argue that stablecoins mostly reflect an increasing demand for investing in cryptoassets rather than serve as a boosting mechanism for periods of extreme appreciation. We further discuss some specificities of 2017, even though the dynamic patterns remain very similar to the general behavior. Overall, we do not find support for claims about stablecoins being bubble boosters in the cryptoassets ecosystem.

Suggested Citation

  • Ladislav Kristoufek, 2022. "On the role of stablecoins in cryptoasset pricing dynamics," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-26, December.
    • Handle: RePEc:spr:fininn:v:8:y:2022:i:1:d:10.1186_s40854-022-00343-8
    DOI: 10.1186/s40854-022-00343-8
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