# What Drives the (In)stability of a Stablecoin?

arXiv: https://arxiv.org/abs/2307.11754 · HTML: https://mlsanity.com/paper/2307.11754/

## Key facts

- Cited by 2 papers in the map (data through 14 Oct 2026).
- First posted on arXiv 15 Jun 2023.

## Built on by (most cited first, 2 of 2)

- [Leveraging Large Language Models to Bridge Cross-Domain Transparency in Stablecoins](https://mlsanity.com/paper/2512.02418/) (2025)
- [Stablecoin Design with Adversarial-Robust Multi-Agent Systems via Trust-Weighted Signal Aggregation](https://mlsanity.com/paper/2601.22168/) (2026)

## Abstract (arXiv)

In May 2022, an apparent speculative attack, followed by market panic, led to the precipitous downfall of UST, one of the most popular stablecoins at that time. However, UST is not the only stablecoin to have been depegged in the past. Designing resilient and long-term stable coins, therefore, appears to present a hard challenge. To further scrutinize existing stablecoin designs and ultimately lead to more robust systems, we need to understand where volatility emerges. Our work provides a game-theoretical model aiming to help identify why stablecoins suffer from a depeg. This game-theoretical model reveals that stablecoins have different price equilibria depending on the coin's architecture and mechanism to minimize volatility. Moreover, our theory is supported by extensive empirical data, spanning 1 year. To that end, we collect daily prices for 22 stablecoins and on-chain data from five blockchains including the Ethereum and the Terra blockchain.