Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
This study shows that, contrary to their intended purpose of stabilizing the crypto-asset ecosystem, stablecoins can become a significant source of market destabilization. While stablecoins like Tether (USDT) were designed to facilitate stable digital transactions and mitigate volatility in crypto portfolios, instances of depegging, where the stablecoin’s value deviates from its target, have introduced new risks. Using high-frequency 5-min price data across 70 non-stable crypto-assets, we show that stablecoin depegging events significantly increase the likelihood of abrupt price jumps in non-stable crypto-assets. Within the first 5 min following a depegging event, the probability of price jumps in the BTC/USD pair increases nearly fivefold compared to normal conditions under our most conservative estimates, while the probability of cojumps rises by a factor of 6.5. Our results also reveal that these jumps tend to be of greater magnitude than those typically observed. These findings underscore the destabilizing role stablecoin depegging can play in the broader crypto market, challenging the assumption that stablecoins inherently contribute to market stability.