Sorry, not much to report today, so here’s a few older stories that have interested me recently, but haven’t posted:
“CarbonUSD, or CUSD for short, is a compliant fiat-backed stablecoin where users can deposit and withdrawal real USD. To mint new CUSD tokens, users can make fiat deposits via ACH or Wire Transfer with our financial partner, Nevada-based Prime Trust. Frequent third-party attestations by leading auditor Cohen & Co. verify publicly that each token is backed 1-to-1 by escrowed funds in FDIC-insured accounts with Prime Trust’s banking partners.”
In recent years, Tether issuances have increased significantly, which correlated broadly with a significant rise in Bitcoin valuation. This paper examines the impact of cryptocurrency issuances on subsequent cryptocurrency returns. It is argued that as Tether is the undisputed ‘stable coin’, the minting of new Tether acts similarly to monetary expansion in cryptocurrency markets, inflating the prices of Bitcoin. We construct a VAR model and show contrary to investor expectations, Tether issuances do not impact subsequent Bitcoin returns, however, they do impact traded volumes. We also document an increase in Tether trading following a subsequent decrease in Bitcoin returns.