We begin our analysis with an overview of the ways in which stablecoins are collateralized, issued on primary markets, and traded on secondary markets. Several papers analyze the effect that the issuance of new stablecoin tokens has on other crypto-asset markets, with evidence suggesting an association between primary markets for stablecoins and secondary markets for stablecoins and other crypto-assets. Our analysis traces activity across primary markets, decentralized secondary markets, and centralized secondary markets during this period of market turmoil to tease out differences between the stablecoins and to show what can be discerned from on-chain and off-chain data. Daily trading volumes on secondary markets over the first half of 2023The increased activity on secondary markets ultimately transmits pressure to the stablecoin's primary market, as excess sell pressure on de-pegged stablecoins and excess demand for stablecoins trading at a premium should theoretically lead to issuance or redemption on the primary market. USDT, meanwhile, is the only stablecoin that experienced increased flow into secondary markets during the week following the de-pegging event, potentially reflecting flight-to-safety dynamics.24 The net flows into secondary markets complements our observations of activity on secondary markets during this period.

Source: Forbes February 23, 2024 18:10 UTC