Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
Moody’s Analytics on Stablecoin Depegging
Stablecoins | Nov 14, 2023
Image: Unsplash/CoinWire Japan
Moody's Analytics reports 609 instances of large fiat-backed depeggings so far in 2023, launches digital asset monitor tracking system
In 2023, the cryptocurrency market has witnessed a significant number of depegging events among large-cap stablecoins. Depegging refers to the fluctuation of stablecoin prices by more than three percent in a day against their fiat pegs, highlighting the volatile nature of these digital assets.
Stablecoins play a crucial role in the cryptocurrency markets, accounting for about 10 percent of the crypto market and most on-chain activity. However, their instability, as evidenced by frequent depegging events, poses significant risks. These events can cause market panic, as seen in May 2022 when TerraUSD's peg against the USD shattered, leading to substantial losses in the crypto market.
Moody's Launches Digital Asset Monitor
In response to the growing need for risk assessment tools in the volatile stablecoin market, Moody's Analytics has launched the AI-enabled Digital Asset Monitor (DAM). This tool is designed to predict the probability of a stablecoin depegging from a fiat currency within a 24-hour time horizon. The launch version of DAM tracks 25 fiat-backed stablecoins, including Tether, USDC, and PayPal Coin, which represent over 92% of the total stablecoin market capitalization.
See: UK’s Future Crypto and Stablecoin Regulation
Moody's DAM provides real-time insights into various aspects of stablecoins, including market and liquidity dynamics, the stability of the issuer, the custodians holding the stablecoin's assets, and the quality of these reserves. The tool combines off-chain and on-chain risk factors, leveraging Moody's expertise in global integrated risk assessment.
The Future
Despite the challenges posed by depegging events, the stablecoin market continues to grow and evolve. With tools like Moody's DAM and increased transparency in the sector, there is potential for greater stability and reliability in stablecoins.
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