A stablecoin that's actually stable: A portfolio optimization approach
Grobys, Klaus; Junttila, Juha Pekka; Kolari, James W. (2025-09-04)
Elsevier
04.09.2025
Grobys, K., Junttila, J.-P., & Kolari, J. W. (2025). A stablecoin that’s actually stable: A portfolio optimization approach. Journal of Financial Stability, 81, 101458. https://doi.org/10.1016/j.jfs.2025.101458
https://creativecommons.org/licenses/by/4.0/
© 2025 The Author(s). Published by Elsevier B.V. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
https://creativecommons.org/licenses/by/4.0/
© 2025 The Author(s). Published by Elsevier B.V. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
https://creativecommons.org/licenses/by/4.0/
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:oulu-202509155846
https://urn.fi/URN:NBN:fi:oulu-202509155846
Tiivistelmä
Abstract
Stablecoins seek to address the high price fluctuations of unbacked cryptocurrencies, such as Bitcoin and Ether. However, recent studies as well as the collapse of stablecoin USTC (Terra) cast doubt on the stability of stablecoins. Using well-known Markowitz portfolio optimization methods, we combine five leading stablecoins into a global minimum variance portfolio that represents a stable aggregate stablecoin (SAS). We find that SAS is much more stable than its constituent stablecoins. Also, in a stress test adding USTC to the portfolio, SAS remains stable with a narrow price range over time. Importantly, the construction of SAS using modern diversification methods has practical implications for the ongoing development of central bank digital currencies (CBDCs).
Stablecoins seek to address the high price fluctuations of unbacked cryptocurrencies, such as Bitcoin and Ether. However, recent studies as well as the collapse of stablecoin USTC (Terra) cast doubt on the stability of stablecoins. Using well-known Markowitz portfolio optimization methods, we combine five leading stablecoins into a global minimum variance portfolio that represents a stable aggregate stablecoin (SAS). We find that SAS is much more stable than its constituent stablecoins. Also, in a stress test adding USTC to the portfolio, SAS remains stable with a narrow price range over time. Importantly, the construction of SAS using modern diversification methods has practical implications for the ongoing development of central bank digital currencies (CBDCs).
Kokoelmat
- Avoin saatavuus [43406]
Ellei muuten mainita, aineiston lisenssi on https://creativecommons.org/licenses/by/4.0/