Journal of Financial and Quantitative Analysis Vol. 61 No. 1 2026
Leverage and Stablecoin Pegs
open access
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.
- DOI
- 10.1017/s0022109025000134
- Volume
- 61
- Issue
- 1
- Pages
- 99-136
- Language
- en
- Sources
- openalex crossref