One Dollar, Many Flavors: Inferring Preferences for Stablecoins with Shai Bernstein | a16z crypto

The research reveals that stablecoins exhibit a "flight to safety" phenomenon during market stress, with traders shifting between different stablecoin designs based on the specific type of risk 1:24.

Key Takeaways:
• During major market events like the Terra collapse, traders dramatically shift preferences toward stablecoins perceived as safer, like moving to USDC and DAI 25:10
• What's considered "safe" depends on the risk type - during regulatory actions like the Tornado Cash ban, traders engage in regulatory arbitrage 30:54
• The Silicon Valley Bank collapse demonstrated third-party risk, causing immediate flight from USDC which had reserves there 34:55
• Despite increased fee revenue during stress, liquidity providers quickly remove liquidity from stablecoins deemed less safe 15:51

Flight to safety creates negative externalities, exposing stablecoins deemed less safe to increased run risk 37:42.

Sources:

• 1:24 Introduction to stablecoin research questions
• 25:10 Terra collapse impact on stablecoin preferences
• 30:54 Regulatory risk and stablecoin shifts
• 34:55 Third-party risk from Silicon Valley Bank collapse
• 15:51 Liquidity provider behavior during stress
• 37:42 Negative externalities from flight to safety