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Huachen Li
''Tether points, price stability, and arbitrage efficiency''
( 2022, Vol. 42 No.4 )
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.
JEL: G1 - General Financial Markets
E4 - Money and Interest Rates: General
Manuscript Received : Oct 19 2021 Manuscript Accepted : Dec 30 2022

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