CryptoQuant – a blockchain analytics firm – has released a report evaluating data around stablecoins and their peg-robustness. It found that holding almost any of the current top stablecoins throughout 2022 was slightly more profitable than holding actual U.S. dollars.
The Slight Stablecoin Premium
According to the report, the historical mean daily closing price for nearly all top stablecoins is slightly above $1.00, based on volume-weighted price closing data spanning back to 2017.
DAI – an Ethereum-based stablecoin backed by a mixture of assets – held a median daily closing price of 40 basis points above $1.00. It proved to hold the top premium among all stables, with USDP and TUSD trading at 35 and 33 basis point premiums, respectively.
“For traders, $BUSD seems the best to hold for a long time because of high close prices and fewer drawdowns,” tweeted CryptoQuant CEO Ki Young Ju regarding the data.
However, the one coin that traded at an overall discount across time was Tether (USDT) – the largest stablecoin by market cap. Tether has also traded at the highest recorded discount among its competitors – a whopping 4%. Meanwhile, USDC (its top competitor) holds an equivalent record for the highest premium at 4%.
“It should be emphasized that most of Tether’s price deviation below $1.00 happened in 2017-2019,” clarifies the report, “and its daily close price has stabilized virtually at US $1.00 since 2020.”
The Most Stable Stablecoin?
The report also analyzes the price deviation patterns of various U.S. dollar-pegged stablecoins over time. Specifically, it measures each coin’s “Peg Robustness” – how much its market price deviates from $1.00 relative to its number of redemptions.
It found that GUSD has the greatest robustness of all stablecoins. That means its price faces little downside volatility even during high-redemption environments.
Meanwhile, USDT had the lowest robustness of all stablecoins. That means its price deviation from $1.00 is high relative to low redemption flows.
As the report explains, a stablecoin is a cryptocurrency that is designed to stay price-pegged to a relatively stable underlying asset. These frequently include fiat currencies but can also include commodities like gold and other financial assets.
At present, the most popular stablecoins, including USDT, USDC, and Binance USD (BUSD) are pegged 1:1 to the U.S. dollar. Typically, these coins maintain their price peg using fully-backed and highly liquid reserves, which stablecoin holders can redeem their tokens for at any time.
The now-defunct TerraUSD (UST) attempted an alternative model whereby the token was backed by LUNA – a highly volatile cryptocurrency. However, the model proved unstable when placed under pressure, with both coins collapsing to zero in May.
Of the current top 3, both Circle and Paxos have clarified in recent attestations that their USDC and BUSD reserves are fully backed by cash and U.S. treasuries. That only leaves Tether left to publish an equivalent Q2 report.