Moody’s Analytics launched its AI-enabled Digital Asset Monitor meant to track the volatility and risk in DeFi amid the mainstream adoption of stablecoins by institutional investors.
The fast growth of fiat-backed stablecoins to over $120 billion by retail users in the past years has attracted major attention from institutional investors seeking to tap into emerging technology to revolutionize global payment systems. However, the global stablecoins market has struggled with frequent depegs, thus attracting the attention of more regulatory scrutiny. The United Kingdom is the recent major economy to map out the crypto assets and fiat-backed stablecoins regulatory frameworks to ensure a sustainable and secure environment for investors.
Stablecoin Depegs Are More Common than You Think
Stablecoins de-pegging has in the past been largely associated with major events like the Terra Luna UST collapse or the Circle (USDC) loss of a banking partner earlier this year. However, a new analytics tool launched by Moody’s Analytics, a veteran financial intelligence company, has unearthed that more than 2,847 stablecoins were de-pegging for over 3 percent in a day against the fiat value in 2022. Out of these figures, 707 de-pegging involved large-cap stablecoins including Tether (USDT), Circle (USDC), and Ether-based DAI.
From January to mid-September this year, Moody’s DAM tool identified a total of 1,914 depegs with the large-cap accounting for 609 times. While small-range depegs are common in the stablecoins market according to Moody’s DAM tool, the firm concluded that the rising interest rates contributed to more de-pegging last year and during the first half of 2023.
“We have seen the stablecoin market grow into a multibillion-dollar asset class accounting for about 10 percent of the crypto market and most on-chain activity. However, given the ongoing volatility in the asset class, we saw substantial demand from our customers to fill a gap in this space with a comprehensive risk assessment tool for digital assets. The tool was built in a year using agile-development frameworks to address customer needs,” Yiannis Giokas, Senior Director of Product Innovation at Moody’s Analytics, noted.
Worth noting that Moody’s Analytics DAM will provide real-time insights on stablecoins with unique DeFi data sources. Some of the features Moody’s DAM will offer to users include the stablecoin’s market and liquidity dynamics, the stability of the stablecoin issuer, the custodians that hold the stablecoin’s assets, and the quality of the stablecoin reserves. Moreover, Moody’s Analytics DAM tool combines on-chain and off-chain analysis to provide a detailed view of the fiat-backed stablecoins. The new stablecoins analytics tool will be available for subscription through the SaaS platform.
The mainstream adoption of blockchain technology and its associated products has significantly shifted the dynamics of the cryptocurrency market. As of reporting time, the stablecoins industry had a market capitalization of about $125 billion and an average 24-hour trading volume of approximately 24 billion.