According to the results of the study, Deutsche Bank Research analysts suggested that most stablecoins are doomed to lose their binding and disappear.
Experts studied 334 linked currencies since 1800 and found that 49% of such assets failed with an average life span of eight to 10 years. The main reasons for the failures turned out to be macroeconomic vulnerability, speculation and governance issues.
The "surviving" currencies usually existed in small authoritarian states or oil exporting countries with a secure financial position.
"Based on our findings, history suggests that stablecoins may face turbulence and depression. While some are able to survive, most are likely to fail due to a lack of transparency in operations and vulnerability to speculative sentiment," Deutsche Bank analysts said.
They recalled that two years ago there was a collapse of the algorithmic "stable coin" Terra USD (UST) and the associated LUNA token. User losses amounted to up to $40 billion. In March 2023, Circle's USDC lost its peg to the dollar as a result of the collapse of Silicon Valley Bank. In January 2024, the TrueUSD (TUSD) raid occurred.
Such incidents have highlighted the volatility and risks of such assets, as well as cast doubt on the future of the segment, analysts say. According to the results of a survey of more than 3,350 consumers, 42% of respondents expect the disappearance of stablecoins. Only 18% of the participants believe in prosperity.
Data: Deutsche Bank Research.Deutsche Bank specialists were able to extrapolate historical data on pegged currencies to non-algorithmic stablecoins due to "their striking similarity."
"Both require sufficient reserves and trust from issuers, are subject to speculative influences, and most track USD," the bank's analysts explained their position.
From this point of view, they expressed concern about the dominant position of Tether's USDT. In their opinion, the sufficiency of providing a leading stablecoin with a capitalization of $ 111 billion is questionable.
The daily trading turnover of the coin exceeds the indicator of the largest cryptocurrency — bitcoin, USDT is widely used in the derivatives market. The collapse of the leading stablecoin can lead to significant losses for traders, especially with leverage, and have a negative impact on the entire industry, experts say.
"As we move forward, it is very important to recognize the challenges in building stable currency bindings, despite the innovation of cryptocurrencies. We are likely to see much more instability in the coming years, and it is extremely important to closely monitor operational and market sentiment to reduce potential risks in stablecoins," Deutsche Bank experts concluded.
Tether criticized the study
The Deutsche Bank analysts' report "lacks clarity and substantial evidence" and relies on "vague statements rather than rigorous analysis." Representatives of Tether stated this in comments provided by Cointelegraph.
\"Deutsche Bank's history of fines and penalties raises doubts about its own standing to critique others in the industry. DB was also named the riskiest bank in the world by the International Monetary Fund.\"
Tether slams Deutsche Bank over suggestion its stablecoin could fail…
According to them, the study does not provide "specific data to support the claims" about the potential collapse of stablecoins.
They also believe that comparing USDT to the Terra algostable is "misleading and irrelevant to the discussion about reserve-backed coins."
"Deutsche Bank's history of fines and sanctions raises doubts about its ability to criticize other industry representatives. The International Monetary Fund called the institution the riskiest bank in the world," Tether added an additional argument.
According to the results of the first quarter of 2024, the company reported a net profit of $4.5 billion for the period. The certification report of the BDO auditor confirmed the excessive provision of stablecoins with reserves consisting of 90% of "cash and cash equivalents". For the most part, we are talking about US Treasury bonds.
The certification from BDO is not a full-fledged financial audit, which has never been conducted by Tether since 2014, Cointelegraph noted.
Recall that Bernstein analysts predicted an increase in the total capitalization of stablecoins to $2.8 trillion in the next five years.
JPMorgan stated that the growing dominance of Tether carries risks for the segment and the crypto ecosystem as a whole.