#2214. On the stability of stablecoins

September 2026publication date
Proposal available till 30-05-2025
4 total number of authors per manuscript6020 $

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Journal’s subject area:
Finance;
Economics and Econometrics;
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Abstract:
This paper investigates the volatility processes of stablecoins and their potential stochastic interdependencies with Bitcoin volatility. We employ a novel approach to choose the optimal combination for the power law exponent and the minimum value for the volatilities bending the power law. Our results indicate that Bitcoin volatility is well-behaved in a statistical sense with a finite theoretical variance. Surprisingly, the volatilities of stablecoins are statistically unstable and contemporaneously respond to Bitcoin volatility. Also, whereas the volatilities of stablecoins are not Granger-causal for Bitcoin volatility, lagged Bitcoin volatility exhibits Granger-causal effects on the volatilities of stablecoins. We conclude that Bitcoin volatility is a fundamental factor that drives the volatilities of stablecoins.
Keywords:
Bitcoin; Financial technology; Power laws; Spillovers; Stablecoins; Volatility

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