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Tether points, price stability, and arbitrage efficiency

Author

Listed:
  • Huachen Li

    (Kenyon College)

Abstract

Stablecoins rely on secondary market arbitrage to maintain price stability. This paper provides novel evidence about the peg mechanism of the largest stablecoin, Tether. Time-varying estimates of Tether points and speed of convergence of price deviation suggest the arbitrage mechanism has been increasingly effective at maintaining price stability. However, the state of the cryptocurrency market, convertibility, and advances in blockchain technology play an important role in Tether's price stability.

Suggested Citation

  • Huachen Li, 2022. "Tether points, price stability, and arbitrage efficiency," Economics Bulletin, AccessEcon, vol. 42(4), pages 2193-2199.
    • Handle: RePEc:ebl:ecbull:eb-21-00991
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2022/Volume42/EB-22-V42-I4-P181.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Cryptocurrency; Stablecoin; Tether; Arbitrage; Price Stability.;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

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    Access and download statistics

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