Stablecoins: Survivorship, Transactions Costs and Exchange Microstructure

Abstract

The three stablecoins that hold cash equivalents as collateral and have market capitalizations over one billion USD have smaller daily price variation than tokens that hold digital assets. 63% of the stablecoins that reached the Mainnet between 2016 and 2021 have failed, but this failure rate is similar to actively traded tokens that are not designed to be stable. USD Coin has a 48% share of 1.47 trillion USD in 2022Q1 transactions, and Tether 32%. The top three stablecoins have an average velocity of 14.7. Tether transacted between 2.2 million unique addresses. Centralized and decentralized exchanges are the most active nodes on the blockchain. Seven of the top ten tokens have unconcentrated Herfindahl indices, but Binance USD and Gemini have single holders with more than 50% of the supply. Median gas fees for Tether rose more than twelve times over the last two years, and nearly twenty times for USD Coin. Transactions of under $50,000 can generally be done more cheaply off-chain. 24 hour exchange turnover in Tether is nearly $60 billion. This is comparable to the daily volume at the NYSE and eight times the daily flow in money market mutual funds. Narrow bid-ask spreads and depth have attracted HFT participation approaching 50%

Keywords: Stablecoins, transactions, fee, hazard function, market microstructure, cryptocurrency

JEL Classification: G12, G23