In a recent report by Moody’s Analytics, an unsettling pattern emerges within the cryptocurrency landscape. Throughout 2023, large-cap stablecoins, boasting a market valuation exceeding $10 billion, have depegged a staggering 609 times.
This figure, alarmingly close to the 707 incidents reported in 2022, casts a shadow on the perceived stability of these digital assets.
Despite their intended purpose as beacons of stability in the volatile seas of cryptocurrency, these large-cap stablecoins have repeatedly failed to maintain their peg to fiat currencies. Notably, the USDC stablecoin from Circle dropped to $0.88 in the wake of the Silicon Valley Bank debacle on March 11. Meanwhile, October saw the Real USD stablecoin’s value plummet by nearly half, spotlighting the persistent volatility that haunts the sector.
Moreover, the high frequency of depegging events sheds light on the underlying instability contrary to the market’s expectations. Moody’s report offers insight, indicating that the triggers for these depegs are manifold, encompassing a broad spectrum of macroeconomic and coin-specific factors.
Moody’s Analytics has taken a proactive step in creating the Digital Asset Monitor. This innovative tool aims to predict the likelihood of a stablecoin’s depegging within a 24-hour window.
The initial version of this monitoring system will track 25 fiat-backed stablecoins, including industry heavyweights like Tether, USDC, and the forthcoming PayPal Coin. Hence, investors and market participants are poised to gain a critical predictive edge, allowing for more informed decision-making amidst the tumultuous crypto markets.