2025/03/14 by Gary B. Gorton, Elizabeth Klee, Elizabeth C. Klee +4 · 10 citations
Chemistry · Engineering · #Business #Chemistry #Civil and Structural Engineering Research #Computer science #Economics #Financial system #Leverage (statistics) #Mechanics and Biomechanics Studies #Monetary economics #Soil Mechanics and Vehicle Dynamics
paper · pdf · doi:10.1017/s0022109025000134
published in Journal of Financial and Quantitative Analysis 61(1), 99-136 (Cambridge University Press)
openalex publication_date 2025/03/14 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/05
Abstract Stablecoins are a new form of private money. They are fragile but largely trade at par. How? We present a model and empirical work to examine a novel source of demand for stablecoins. Stablecoin owners are indirectly compensated for run risk by lending their coins to crypto speculators. The stablecoin can then support its 1 peg, but this arrangement links crypto speculation to traditional financial markets where stablecoins invest their reserves.