The Influence of Stablecoin Issuances on Cryptocurrency Markets

15 Pages Posted: 8 Jul 2020

See all articles by Lennart Ante

Lennart Ante

University of Hamburg; Blockchain Research Lab

Ingo Fiedler

University of Hamburg - Institute of Commercial Law

Elias Strehle

Blockchain Research Lab

Date Written: June 15, 2020

Abstract

Stablecoins are digital currencies whose value is pegged to fiat currencies like the dollar or other assets. They were created as a more flexible alternative to fiat currencies for cryptocurrency exchanges and constitute an increasingly important aspect of cryptocurrency markets and alternative finance. We analyze the influence of stablecoin issuances on the returns of major cryptocurrencies across 565 issuance events of $1 million or more for seven different stablecoins on four different blockchains between April 2019 and March 2020. Our event study reveals cryptocurrency market downturns in the week before a stablecoin issuance and positive abnormal returns for major cryptocurrencies in the twenty-four hours before and after the issuance. Effect sizes differ across stablecoins. Counterintuitively, we find that issuance size does not significantly affect the abnormal returns. We conclude that stablecoin issuances contribute to price discovery and market efficiency of cryptocurrencies.

Keywords: Market efficiency, Informational efficiency, Price discovery, Asset pricing, Event study, Transaction activity, Tether, Bitcoin, Ethereum

JEL Classification: G10, G14

Suggested Citation

Ante, Lennart and Fiedler, Ingo and Strehle, Elias, The Influence of Stablecoin Issuances on Cryptocurrency Markets (June 15, 2020). Available at SSRN: https://ssrn.com/abstract=3626969 or http://dx.doi.org/10.2139/ssrn.3626969

Lennart Ante (Contact Author)

University of Hamburg ( email )

Allende-Platz 1
Hamburg, 20146
Germany

Blockchain Research Lab ( email )

Colonnaden 72
Hamburg, 22303
Germany

Ingo Fiedler

University of Hamburg - Institute of Commercial Law ( email )

Max-Brauer-Allee 60
Hamburg, 22765
Germany
+4940428386539 (Phone)
+4940428386443 (Fax)

HOME PAGE: http://www.wiso.uni-hamburg.de/institute/irdw

Elias Strehle

Blockchain Research Lab ( email )

Colonnaden 72
Hamburg, 22303
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
68
Abstract Views
482
rank
375,182
PlumX Metrics