- Deutsche Bank Research analysts predict that many stablecoin projects are likely to fail, with only 14% expected to survive.
- Stablecoins are digital currencies pegged to another asset like fiat currency or gold, and are often considered a “safe haven” in the volatile crypto market.
- The analysts examined approximately 334 stablecoins launched since 1800 and found that only a few currently exist.
Deutsche Bank Research suggests that a majority of stablecoin projects are doomed to fail, with only a small fraction expected to survive in the long run.
Stablecoin Projects: A High Failure Rate
According to a study by Deutsche Bank Research analysts, many stablecoin projects are likely to fail, with only 14% expected to survive. Stablecoins are digital currencies pegged to another asset like fiat currency or gold. Due to their stability, many investors prefer them as a “safe haven” in the volatile crypto market. The analysts examined approximately 334 stablecoins launched since 1800 and found that only a few currently exist.
Key Factors for Survival
The analysts identified three key attributes that successful projects have, which unsuccessful ones lack: reliability, reserve support, and tightly controlled systems. According to the study, 49% of stablecoins failed after existing for only 8 to 10 years. The analysts argued that “macroeconomic factors play a key role in determining the sustainability of a stablecoin.”
Comparison with Fiat Currencies
Deutsche Bank Research Senior Strategist Marion Laboure stated, “We chose to compare stablecoins with fiat currencies because historically, their similarities make them alike. Both require extensive reserves and reliability from issuers. Most are exposed to speculative forces, and the majority of both stablecoins and historical currency pegs follow the USD.”
Reactions from the Industry
However, Tether, the issuer of the stablecoin giant USDT, disputed the Deutsche Bank Research report, claiming that the analysts could not produce “concrete data” to support their arguments. While the researchers pointed to Terraform Labs’ TerraUSD as an example of a stablecoin’s downfall, Tether commented that “Comparing it with Terra, an algorithmic stablecoin, is misleading and irrelevant to the discussion about reserve-backed coins.”
Conclusion
In conclusion, while stablecoins have emerged as a popular form of digital currency, their long-term sustainability remains questionable. As the crypto market continues to evolve, the survival of these projects will largely depend on their ability to maintain reliability, reserve support, and tightly controlled systems.
