Unwavering Stablecoins? A Comparative Analysis of Dollar-Peg Stability

CryptoMode Stablecoins Growth crypto coins MUFG Stablecoin

Stablecoins, pegged to the dollar, serve as the bedrock of the crypto economy. Yet, not all stablecoins maintain their peg with the same vigor. A recent S&P Global study highlights that while some stablecoins like Circle’s USD Coin (USDC) and DAI often veer off their peg, others exhibit exceptional steadiness.

Analyzing the Big Five Stablecoins

The research, spearheaded by Dr. Cristina Polizu, Anoop Garg, and Miguel de la Mata, took an in-depth look into the performance of five major stablecoins: Tether (USDT), Binance USD (BUSD), Paxos (USDP), USDC, and DAI.

Their findings were revealing. Over the past 24 months, USDC and DAI witnessed more depegging than USDT and BUSD. USDC’s value dropped below $0.90 for 23 minutes, while DAI remained at that level for 20 minutes. In contrast, USDT’s briefest dip was just below $0.95, lasting a minute. Impressively, BUSD remained resilient, never slipping beneath $0.975 between June 2021 and June 2023.

Check out our weekly crypto and fintech newsletter here! Follow CryptoMode on Twitter, Youtube and TikTok for news updates!

However, it’s not just about the depth of the dip but also its frequency. The two-year period under scrutiny saw USDC and DAI experience de-pegging far more frequently than USDT and BUSD.

But it’s vital to note, as the researchers pointed out, that brief one-minute de-pegging events, especially those close to the $1 mark, could be mere market “noise”. More prolonged deviations, however, carry more weight. Notably, USDT outperformed USDC in this context.

The Silicon Valley Bank Incident

March 2023 was particularly harrowing for USDC, which plummeted to $0.87, a fall connected with the Silicon Valley Bank‘s unfortunate collapse. At this juncture, Circle, the issuer of USDC, had a whopping $3.3 billion of its $40 billion USDC reserves with the bank. MakerDAO, holding over 3.1 billion USDC, used it to back DAI, leading to its subsequent de-pegging.

The maintenance of a stablecoin’s peg isn’t an arbitrary act. As Dr. Polizu and her team emphasize, it demands robust governance, substantial collateral, ample reserves, liquidity, market confidence, and widespread adoption.

None of the information on this website is investment or financial advice. CryptoMode is not responsible for any financial losses sustained by acting on information provided on this website.