Demand for Safety in the Crypto Ecosystem
We study the demand for safety and liquidity in the crypto ecosystem. We do so under a framework in which a representative investor allocates liquidity across stablecoin deposits in lending pools and traditional safe assets (e.g., MMF shares). Our model delivers three main predictions: (i) the stablecoin deposit premium co-moves with the Treasury premium when investors value the safety and liquidity services of stablecoins; (ii) increases in Treasury supply reduce the stablecoin deposit premium; and (iii) drops in the perceived safety and liquidity of stablecoin deposits (e.g., due to de-pegs or hacker attacks) reduce their premium. Using granular data from hundreds of DeFi pools spanning multiple protocols, tokens, and blockchains, we find evidence supporting these predictions. Investors treat stablecoin deposits as money-like instruments that are borderless and permissionless, yet as fragile as other forms of privately produced safe assets.
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Copy CitationMurillo Campello, Angela Gallo, Lira Mota, and Tammaro Terracciano, "Demand for Safety in the Crypto Ecosystem," NBER Working Paper 35557 (2026), https://doi.org/10.3386/w35557.Download Citation
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