Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/311151 
Year of Publication: 
2024
Series/Report no.: 
ECB Working Paper No. 2987
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
Using a new series of crypto shocks, we document that money market funds' (MMF) assets under management, and traditional financial market variables more broadly, do not react to crypto shocks, whereas stablecoin market capitalization does. U.S. monetary policy shocks, in contrast, drive developments in both crypto and traditional markets. Crucially, the reaction of MMF assets and stablecoin market capitalization to monetary policy shocks is different: while prime-MMF assets rise after a monetary policy tightening, stablecoin market capitalization declines. In assessing the state of the stablecoin market, the risk-taking environment as dictated by monetary policy is much more consequential than flight-to-quality dynamics observed within stablecoins and MMFs.
Subjects: 
stablecoins
crypto
Bitcoin
monetary policy shocks
money market funds
JEL: 
E50
F30
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-6886-7
Document Type: 
Working Paper

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