A Multivariate Hawkes Process Model for Stablecoin-Cryptocurrency Depegging Event Dynamics

TL;DR

This paper introduces a multivariate Hawkes process model to analyze the dynamics of stablecoin depegging events and their impact on cryptocurrencies like Bitcoin, providing a new quantitative approach to understanding these phenomena.

Contribution

The paper develops a novel multivariate Hawkes process model specifically designed for stablecoin depegging events and demonstrates its application to USDT and BTC.

Findings

Model captures the mutual excitation between stablecoin depegging and cryptocurrency fluctuations

Provides a framework for predicting depegging event impacts

Enhances understanding of stablecoin-cryptocurrency interactions

Abstract

Stablecoins, digital assets pegged to a specific currency or commodity value, are heavily involved in transactions of major cryptocurrencies. The effects of deviations from their desired fixed values (depeggings) on the cryptocurrencies for which they are frequently used in transactions are therefore of interest to study. We propose a model for this phenomenon using a multivariate mutually-exciting Hawkes process, and present a numerical example applying this model to Tether (USDT) and Bitcoin (BTC).