«Despite their supposed convertibility to fiat world currencies, the stablecoins “They are not the safest assets to face the current financial crisis,” says a working document from the European Central Bank (ECB) published on October 7.
In his study, titled «Stablecoins, Money Market Funds, and Monetary Policy» (Stablecoins, money market funds and monetary policy), the ECB explore the response of stablecoins to probable shocks of the market, with the aim of understanding how these assets react to different variables.
According to what the authors of the report say, the role of stablecoins as a safe haven is questionable. This is because – according to their research – the resilience that these currencies show during crises in the cryptocurrency market does not extend to the economic problems that affect traditional financial markets.
They cite with this the role that stable currencies play as buffers against the volatility of bitcoin (BTC) and other cryptocurrenciesserving investors as a refuge from constant price changes. A role that, as the ECB points out, they do not fulfill in the face of the fluctuations that characterize the most traditional assets.
«That makes many investors tend to move to safer assets during the changes generated in monetary policy,” indicates the report, referring to the high interest that exists in gold and other metals such as silver.
Analysts also dispute claims that point to a lack of correlation between cryptocurrencies and traditional financial markets, stating that the monetary policy of the dollar acts as “the key nexus” between both markets. In that sense, they observe a marked tendency for cryptocurrencies (like stocks) to be greatly affected by economic and financial problems. Although in this case they also affect the stablecoins.
As part of these investigations, ECB analysts analyzed the market of the stablecoins USDTUSDC and Dai for three monthsa period in which they noticed significant changes when the price of bitcoin fell. «At those times the market capitalization of the stablecoins “It tends to fall around 4 percentage points,” the report states.
We find that changes in US monetary policy produce strong disruptions in both traditional markets and cryptocurrencies. During these crypto shocks, the market capitalization of stablecoins is affected. Consequently, the stablecoins, As a whole, they do not act as a refuge from financial crises.
European Central Bank.
The ECB’s investigations also allow it to ensure that movements in the cryptocurrency market are irrelevant to traditional markets. “Stock prices and 3-month yields barely move following crypto market disruptions,” the study notes.
Seen in this way, as US monetary policy shocks have a significant impact on both traditional financial markets and crypto markets (and therefore on stablecoins), “our data does not support the claim that stablecoins can perform the role of crypto-shelter,” concludes the ECB.
