2025/03/14 by Gary B. Gorton, Elizabeth Klee, Elizabeth C. Klee +4
Engineering · #Mechanics and Biomechanics Studies #Civil and Structural Engineering Research #Soil Mechanics and Vehicle Dynamics
paper · pdf · doi:10.1017/s0022109025000134
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.