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Stablecoins and Crypto Shocks: An Update

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Abstract

Stablecoins are crypto assets whose value is pegged to that of a fiat currency, usually the U.S. dollar. In our first Liberty Street Economics post, we described the rapid growth of stablecoins, the different types of stablecoin arrangements, and the May 2022 run on TerraUSD, the fourth largest stablecoin at the time. In a subsequent post, we estimated the impact of large declines in the price of bitcoin on cumulative net flows into stablecoins and showed the existence of flight-to-safety dynamics similar to those observed in money market mutual funds during periods of stress. In this post, we document the growth of stablecoins since 2019, including the evolution of the reported collateral backing major stablecoins. Then, we estimate the impact on the stablecoin industry of large bitcoin price increases that occurred between 2021 and 2025.

Suggested Citation

  • Kenechukwu E. Anadu & Pablo D. Azar & Catherine Huang & Marco Cipriani & Thomas M. Eisenbach & Gabriele La Spada & Mattia Landoni & Marco Macchiavelli & Antoine Malfroy-Camine & J. Christina Wang, 2025. "Stablecoins and Crypto Shocks: An Update," Liberty Street Economics 20250423, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:99893
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    File URL: https://libertystreeteconomics.newyorkfed.org/2025/04/stablecoins-and-crypto-shocks-an-update/
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    Keywords

    stablecoins; crypto assets;

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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