NYDIG is putting to rest what it sees as one of the most persistent myths in crypto: that stablecoins are tied to the US dollar.
In a post-mortem analysis of last week’s $500 billion crypto market sell-off, Greg Cipolaro, global head of research at the Bitcoin-focused financial services firm, highlighted the instability of so-called stable assets like Ethena’s USDC, USDT and USDe, which fell as low as $0.65 on Binance.
Price fluctuations have revealed that these tokens do not operate on fixed rates, but rather they float based on market supply and demand.
“Stablecoins are not pegged to a $1.00 period,” NYDIG’s Cipolaro wrote in a research note. “In reality, stablecoins are market-traded instruments whose prices fluctuate around $1.00 due to trading dynamics.”
He argued that terms like “anchor” imply a guarantee that does not exist. What appears to be stability is actually just arbitrage: traders buy when the coin falls below $1 and sell when it rises above, with issuers offering mechanisms to create or repurchase tokens in response to these movements.
When panic occurs, this system can collapse. USDT and USDC traded above $1 during the crash, while USDe, which uses derivative positions to remain “delta neutral” and generate yield, collapsed. Although the results were worse on Binance – which later compensated users – it also saw significant declines on other major exchanges.
The result, he added, is a fragmented ecosystem where even widely used assets can fail in real time and where users have little understanding of the real risks.
Credit markets were the best performers during the crash. Leading DeFi protocol Aave has only liquidated $180 million in collateral, or 25 basis points of its total value locked. NYDIG itself suffered no losses.
