Are stablecoins truly diversifiers, hedges, or safe havens against traditional cryptocurrencies as their name suggests?

Wang, Gang‐Jin; Ma, Xinyu; Wu, Hongyu

doi:10.1016/j.ribaf.2020.101225

Cited by 96 publications

(45 citation statements)

References 46 publications

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“…Considering the linkage between traditional cryptocurrencies and stablecoins during December 2018 -July 2019, Baur and Hoang (2020) find the strongest safe-haven effects in Tether. Using data up to March 2019, Wang et al (2020) also document the safe-haven property of stablecoins for traditional cryptocurrencies and note that such characteristics change across different market conditions. However, these empirical tests have been devoid of an essential component -a test during a period of significant turmoil in asset markets such as the recent COVID-19 pandemic.…”

Section: Introductionmentioning

confidence: 99%

“…As a result, it is not surprising to observe increasing interest from investors in stablecoins following the downturns of traditional cryptocurrencies. A stream of literature thus links the role of stablecoins to that of gold as hedges or safe-haven assets in cryptocurrency portfolios (Baur and Hoang, 2020;Wang et al, 2020). Baur and Lucey (2010) define safe-haven assets as those with little or a negative correlation with other assets during crises.…”

Section: Introductionmentioning

confidence: 99%

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Are Stablecoins Safe Havens for Traditional Cryptocurrencies? An Empirical Study during the COVID-19 Pandemic

Xie

Kang

Zhao³

2021

AFL

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We investigate whether stablecoins are safe havens for traditional cryptocurrencies with fresh evidence from the recent crisis period of the COVID-19 pandemic. Our results support the safe-haven properties of Tether for both before and during the pandemic. For Digix, a gold-backed stablecoin with relatively small market capitalization, we find a change in characteristics before and during the pandemic, but do not find statistically significant evidence for its safe-haven properties. Furthermore, we document that, when considering the economic benefits and costs of adding safe-haven assets into cryptocurrency portfolios, the one with Tether outperforms both a naked portfolio and the portfolio with a traditional safe-haven asset such as gold.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Are Stablecoins Safe Havens for Traditional Cryptocurrencies? An Empirical Study during the COVID-19 Pandemic

Xie

Kang

Zhao³

2021

AFL

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“…Ante et al (2020) analyse seven fiat-backed stablecoins and find that stablecoin issuances contribute to price discovery and market efficiency of cryptocurrencies. Wang, Ma, and Wu (2020) analyse three USD-pegged and three gold-pegged stablecoins (DGD, HGT, and XAUR) up to March 2019 and show that even though gold-backed cryptocurrencies are not as effective as gold in their safe haven properties, they can still be used effectively in reducing extreme losses. Aloui, Ben Hamida, and Yarovaya (2020) analyse differences between Islamic and non-Islamic gold-backed cryptocurrencies and show that the former are less susceptible to geopolitical risk than non-Islamic tokens.…”

Section: Introductionmentioning

confidence: 99%

“Shiny” crypto assets: A systemic look at gold-backed cryptocurrencies during the COVID-19 pandemic

Jalan

Matkovskyy

Yarovaya

2021

International Review of Financial Analysis

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In this paper, we empirically analyse the performance of five gold-backed stablecoins during the COVID-19 pandemic and compare them to gold, Bitcoin and Tether. In the digital assets' ecosystem, gold-backed cryptocurrencies have the potential to address regulatory and policy concerns by decreasing volatility of cryptocurrency prices and facilitating broader cryptocurrency adoption. We find that during the COVID-19 pandemic, gold-backed cryptocurrencies were susceptible to volatility transmitted from gold markets. Our results indicate that for the selected gold-backed cryptocurrencies, their volatility, and as a consequence, risks associated with volatility, remained comparable to the Bitcoin. In addition, gold-backed cryptocurrencies did not show safe-haven potential comparable to their underlying precious metal, gold.

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“…Based on the analysis of market behaviour, we argue that all selected fiat-backed stablecoins except for 1SG and VNDC are subject to an insignificant risk of change in value. Their value is relatively stable on the secondary markets and ranges with slight deviations around the pegged value, which is, in essence, consistent with Wang et al (2020) and Baur and Hoang (2021). Besides, they can be considered subject to an insignificant risk of…”

Section: Results Of Step 3: Requirement Of the Insignificant Risk Of Change In Valuementioning

confidence: 81%

Can Fiat‐backed Stablecoins Be Considered Cash or Cash Equivalents Under International Financial Reporting Standards Rules?

Hampl¹,

Gyönyörová²

2021

Australian Accounting Review

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Stablecoins are a rapidly evolving subcategory of cryptocurrency that aim to reduce the price fluctuations of traditional cryptocurrencies and thus become a common digital payment instrument. This paper aims to assess the material substance of fiat-backed stablecoins to determine whether fiat-backed stablecoins could be considered, in accordance with IFRS, as cash or cash equivalents. We chose 11 fiat-backed stablecoins representing 99.97% of the total market capitalisation of all fiat-backed stablecoins. Using a three-step approach, we performed an analysis of the legal and general terms and conditions of the selected stablecoins and of cryptocurrency exchanges, and quantitatively analysed their risk characteristics in comparison with fiat currency pairs, money market indexes and instruments, and traditional cryptocurrencies. The results show that nine of the 11 stablecoins met the objective requirements of cash equivalents according to their material substance and, using an extensive interpretation of IAS 7, could be reported as cash equivalents. This study enhances understanding of the material substance of fiat-backed stablecoins for their financial reporting and can be used by entities when creating accounting policies under existing IFRS rules and by accounting standard setters as evidence when formulating new rules or officially interpreting existing ones to provide guidance on the financial reporting of fiat-backed stablecoins.

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Are stablecoins truly diversifiers, hedges, or safe havens against traditional cryptocurrencies as their name suggests?

Cited by 96 publications

References 46 publications

Are Stablecoins Safe Havens for Traditional Cryptocurrencies? An Empirical Study during the COVID-19 Pandemic

Are Stablecoins Safe Havens for Traditional Cryptocurrencies? An Empirical Study during the COVID-19 Pandemic

“Shiny” crypto assets: A systemic look at gold-backed cryptocurrencies during the COVID-19 pandemic

Can Fiat‐backed Stablecoins Be Considered Cash or Cash Equivalents Under International Financial Reporting Standards Rules?

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