Problem
Research questions and friction points this paper is trying to address.
stablecoin contagion
USDC depeg
on-chain activity
systemic risk
flight-to-quality
Tracing Stablecoin Contagion during the USDC Depeg after the Silicon Valley Bank Collapse
🤖 AI Summary
This study investigates the contagion mechanisms and user behavior restructuring within the stablecoin ecosystem during the USDC depegging event triggered by the collapse of Silicon Valley Bank in 2023. Leveraging high-granularity on-chain transaction data, the analysis integrates phase dynamics, cross-asset synchronicity metrics, and account-level behavioral modeling to identify, for the first time, a bipartite contagion pathway in stablecoin markets under systemic stress. The findings reveal that major stablecoins exhibited pronounced price synchronicity during the crisis, with USDC experiencing immediate price deviations and surging trading volumes. Users rapidly shifted toward multi-stablecoin portfolios, highlighting risk-averse behavior in digital asset networks and the influence of diurnal rhythms on asset reallocation decisions.
📝 Abstract
The March 2023 collapse of Silicon Valley Bank (SVB) disrupted the core premise of stablecoins, which are digital tokens designed to maintain a fixed value against the U.S. dollar and serve as on-chain substitutes for dollar liquidity. The event triggered a sharp depeg of USDC, creating a rare exogenous shock to the stablecoin ecosystem. While price deviations during this crisis are well documented, the underlying behavioral reorganization of on-chain activity remains less understood. Here, we analyze high-granularity transaction data to measure the shock's effects on network activities, volumes, and prices, reconstructing the contagion pathway from market-wide synchronization down to account-level reallocation. By extracting phase dynamics, we first show that transaction activity across major stablecoins became strongly synchronized during the crisis window, indicating a collective market-level response. We then uncover a bifurcated contagion pathway. While USDT, WBTC, and WETH reacted primarily as liquidity absorption channels with larger trade volumes, only USDC-related assets exhibited immediate price responses alongside surging transaction counts. This reflects the dominant role of USDC-related assets in this incident and their immediate behavioral connection to user panic, driving a mass reallocation from single-coin to multi-coin portfolios. Finally, governed by persistent intraday time-zone rhythms and balance-size heterogeneity, these findings provide a comprehensive empirical framework for understanding systemic risk and flight-to-quality mechanisms in fractional-reserve digital asset networks.
Innovation
Methods, ideas, or system contributions that make the work stand out.
stablecoin contagion
on-chain transaction dynamics
market synchronization
flight-to-quality
fractional-reserve digital assets
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