Analysis of Stablecoins during the Global COVID-19 Pandemic
Clemens Jeger, Bruno Rodrigues, Eder J. Scheid, Burkhard Stiller
Abstract
One of the major concerns with cryptocurrencies is their price instability, driven by market speculation, underlying technology, and applications. Stablecoins were introduced to address volatility and to provide means for an electronic payment and a value store remaining stable, often being supported by physical assets or fiat currency (e.g., gold or US dollars, respectively). However, different collateralization mechanisms exist and different assets are pegged with the coin that can affect their stability in different ways. This work overviews stablecoin stability mechanisms, the current stablecoin market landscape, and the performance of major stablecoins during the 2020 financial market crisis due to the COVID-19 pandemic. Results from this analysis indicate that stablecoins' performance during the financial crisis and, in particular, the market crash present a direct relation with their specific behavior attributed to different design aspects, including their popularity.