Editor's Note: This article comes fromBabbitt Information (ID: bitcoin8btc)Editor's Note: This article comes from
Babbitt Information (ID: bitcoin8btc)
Babbitt Information (ID: bitcoin8btc)
, by Colin Harper, translated by Captain Hiro, published with permission.
Critics have been saying that stablecoins are being used to drive up the price of Bitcoin, Decrypt reported on April 24. But new research by two professors at the University of California, Berkeley, suggests that may not be the case.
UC Berkeley's Richard K Lyons and finance professor Ganesh Viswanath-Natraj wrote a new report for the Center for Economic Policy Research (CEPR) titled "Stablecoins Won't Boost Crypto Markets," which looks at " The extent to which "total stablecoin issuance" drives the price of Bitcoin and other cryptocurrencies. The report analyzed the issuance of Tether and other stablecoins from October 2017 to the present to determine whether stablecoins will drive the price of cryptocurrencies.
The report’s findings showed a zero correlation between inflows into the stablecoin market and increases in cryptocurrency prices, the report reads:
The finding contrasts sharply with a 2018 paper by John Griffin of the University of Texas and Amin Shams of Ohio State University. The theories published by these two professors have aroused the interest of industry insiders and mainstream media. Last year, some researchers said that the rise in currency prices in 2017 was caused by a whale (a large currency holder). The researchers reasoned that after Tether printed a large number of USDT, the price of Bitcoin skyrocketed, so the issuance of USDT may drive the price trend of the cryptocurrency.
According to the report:
But this discovery has also been criticized by many industry insiders. Critics believe that if the price of Bitcoin rises after Tether prints USDT, it can only mean that market participants have entered the market by buying USDT, or that they have avoided it by exchanging their crypto assets for USDT during a market downturn. Asset volatility risk. For example, in March of this year, when the price of Bitcoin plummeted, Tether and other stablecoins saw record inflows.
The study by Lyons and Viswanath-Natraj concluded that stablecoins like Tether are used because there is an overwhelming demand for such stablecoins from market participants.
Stablecoin usage has risen sharply over the past two years, and it is estimated that the total transaction volume between Bitcoin and Tether, the largest stablecoin by market capitalization, will exceed the transaction volume of Bitcoin/USD in 2019. Stablecoin usage should continue to grow rapidly, in line with their 'raison d'être', which is to solve the store of value problem by pegging the value of stablecoins to the U.S. dollar.
Researchers at the Center for Economic Policy Research said in their report:
We use a more precise method to measure funds flowing to secondary markets and find that these funds have no significant impact on the price of major cryptocurrencies (non-stablecoins). The selection of the sample period for the above results includes the period when the price of Bitcoin surged in late 2017, and our selections are all reliable.
secondary title
Arbitrage and volatility hedging are the top two motivations for investing in stablecoins
The new study pinpoints two main drivers of investing in stablecoins: exchange arbitrage and volatility hedging.
The report also explained that many traders will buy USDT from Tether Treasury at $1 and sell it on exchanges and other secondary markets for more than $1 when Tether is trading above its peg .
These arbitrageurs have a large share of the market. The report reads:
For every 100 basis point (1 cent) increase in Tether’s dollar price, roughly $300 million flows into secondary markets.
In addition to this arbitrage activity, the purpose of traders using stablecoins is simply to use stablecoins as a tool of stable value during times of market volatility. According to the researchers:
Stablecoins have always served as a safe haven in the digital economy.
