Tether points, price stability, and arbitrage efficiency

Huachen Li ()
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Huachen Li: Kenyon College

Economics Bulletin, 2022, vol. 42, issue 4, 2193 - 2199

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.

Keywords: Cryptocurrency; Stablecoin; Tether; Arbitrage; Price Stability. (search for similar items in EconPapers)
JEL-codes: E4 G1 (search for similar items in EconPapers)
Date: 2022-12-30
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