Abstract

Purpose – This paper aims to systematically investigate and compare the hedge and safe-haven properties of stablecoins against international indices. It distinguishes itself from the existing literature by examining how risk-mitigation capabilities differ based on a stablecoin’s underlying collateral mechanism.

Design/methodology/approach – The authors employ a DCC-GARCH model to analyze the time-varying correlations between a large sample of 44 stablecoins and 30 international indices from October 2022 to September 2024. A core innovation is the systematic classification of stablecoins into five distinct categories (fiat-backed, algorithmic, crypto-collateral, physical gold-backed and synthetic assets-backed) to conduct a granular comparative analysis. Rolling window analysis is also utilized to assess these properties over shorter investment horizons.

Findings – The study reveals that hedge and safe-haven properties are highly heterogeneous and depend critically on the stablecoin’s design. Synthetic assets-backed stablecoins demonstrate overwhelmingly superior performance, acting as a strong hedge and weak safe haven for 21 of the 30 indices analyzed. In stark contrast, fiat-backed stablecoins, the largest market segment, exhibit very limited risk-mitigation capabilities.

Practical implications – The findings provide crucial insights for both investors and policymakers. Investors seeking portfolio diversification should not treat all stablecoins as equal; synthetic asset-backed stablecoins are shown to be far more effective for managing risk against global equity downturns. For regulators, the paper highlights the urgent need for stringent oversight of fiat-backed reserves, while also noting that the effective but complex nature of decentralized synthetic stablecoins presents a different set of regulatory challenges and opportunities.

Originality/value – This paper makes a significant contribution by providing the first comprehensive, classification-based analysis of stablecoins’ role as potential risk-mitigation assets against a broad array of international stock indices. It challenges the monolithic view of “stablecoins” by empirically demonstrating that the underlying collateral design is the key determinant of their effectiveness as a hedge or safe haven.

Using a tiny, acid-tolerant yeast, scientists have demonstrated a cost-effective way to make disposable diapers, microplastics, and acrylic paint more sustainable through biomanufacturing. Researchers at the University of Illinois Urbana-Champaign and Penn State University developed a bio-based method to produce 3-Hydroxypropanoic acid (3-HP), a precursor chemical for the acrylic acid used in those products, and validated its commercial potential for this lucrative market. The scientists are all part of the Center for Advanced Bioenergy and Bioproducts Innovation (CABBI), a U.S. Department of Energy (DOE) Bioenergy Research Center.