Comparative Analysis of Stablecoin Market Capitalization
No Thumbnail Available
Date
2024
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
University of Sussex
Abstract
This paper takes a closer look at the market capitalization trends for the five most popular stablecoins: Tether, USD Coin, Dai, TrueUSD, and PAX Gold. Stablecoins are digital currencies whose price volatility is minimized since their value is pegged to an underlying asset, such as a fiat currency or commodity. Despite the ever-growing importance, very little research has been done to explain the factors affecting their market capitalization and what this means for the general financial market.
The design of the research applies an empirical study with a quantitative approach in analyzing historical data of the market capitalization for these stablecoins over a defined period. In the analysis, it identifies major determinants of the market capitalization: regulatory developments, rates of adoption, technological advancements, and macroeconomic conditions. The study further shows comparative stability and growth patterns among the chosen stablecoins and gives insight into which performs better relatively in the cryptocurrency marketplace.
The results indicate there were major differences in the trends of market capitalization for studied stablecoins, thus evidence of the impact from exogenous variables such as regulatory change and changes in market demand. In the light of this, the study finds that it is very important to stakeholders, including investors, policy makers, and financial analysts, that these factors are understood well to make informed decisions within the fast-changing landscape of digital currencies. This work thus adds value to the literature base with meaningful insights into the dynamics of stablecoin market capitalization, with implications for the future of digital financial assets.
Description
The paper titled "Comparative Analysis of Stablecoin Market Capitalization" by Naif Alshammari examines the market capitalization trends of five major stablecoins: Tether (USDT), USD Coin (USDC), Dai (DAI), TrueUSD (TUSD), and PAX Gold (PAXG). These stablecoins are digital currencies pegged to underlying assets such as fiat currencies or commodities to reduce price volatility, making them essential in the cryptocurrency ecosystem.
The research adopts a quantitative empirical approach, analyzing historical data to identify the key factors influencing stablecoin market capitalization, including regulatory developments, adoption rates, technological advancements, and macroeconomic conditions. Through comparative analysis, the study highlights the performance, growth trajectories, volatility, and stability of each stablecoin, offering insights into how these digital assets interact with the broader cryptocurrency market.
Key findings suggest that while Tether and USD Coin dominate the market, they exhibit different levels of volatility, with Tether experiencing more fluctuations due to regulatory scrutiny. Dai, being decentralized, shows more volatility compared to fully collateralized stablecoins like TrueUSD. PAX Gold, backed by physical gold, behaves uniquely, with its market capitalization tied closely to gold prices.
The study concludes that understanding these factors is critical for investors, policymakers, and financial analysts to navigate the dynamic landscape of stablecoins and digital financial assets. This research contributes to the growing body of literature by offering a detailed comparative analysis of stablecoins, identifying key drivers of market capitalization, and discussing their implications for the future of digital currencies.
Keywords
Cryptocurrency, Stablecoin, Market Capitalization, Fiat Currency