Stablecoin Risk Metrics

Exponent is developing an open source document of metrics (with descriptions) that are crucial to our product offerings. This document will be updated regularly.
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Metric Name
Date Updated
Stablecoin Price
A stablecoin’s $USD denominated price ($x.xx) for a specific day, associated with a known price oracle or data provider (i.e., Chainlink, Coinpraprika, Dune Anaytics). Stablecoins maintain their peg to traditional currencies (e.g., $USDC or $EUROC, euro coin). The three primary mechanisms for maintaining peg are: 1. fiat-collateralized (USDC, USDT, BUSD), 2. crypto-collateralized (DAI), 3. non-collateralized (seigniorage model). There are also hybrid models (like FRAX) that employs a mixture of fiat- and non-collateralized mechanisms [1]
November 4, 2022
References: 1. Harvey, C.R., Ramachandran, A. & Santoro, J. (2021). DeFi and the Future of Finance.
Stablecoin Peg Deviation
The difference in a stablecoin’s $USD denominated price ($x.xx), at a point in time, and the $1.00 USD peg. Within a time interval (9 months). Peg deviation is the number of hours a stablecoin token’s price has spent over a price band (e.g., inner or outer band).
November 4, 2022
Stablecoin Peg Deviation (standard deviation alternate)
The difference in a stablecoin’s $USD deonominated price ($x.xx), at a point in time, and the trailing average price over a time interval (e.g., 90-days). Standard Deviation of the Peg is the number of hours a stablecoin token’s price has spent outside 1 standard deviation of the trailing average.
November 29, 2022
Inner / Outer Stablecoin Price Band
Outer band: $0.99 - $1.01 Inner band: $0.995 - $1.005
November 4, 2022
Stablecoin Standard Deviation
How much a stable coin $USD-denominated price deviates from the average price over a time interval (e.g., 90 days). The formal equation: Take the root of - Sum of squared deviation (each price point minus average price) divided by number of observations (90 days)
November 4, 2022
Average Price (stable coin)
The mean or average of a stable coin’s price over a time period (e.g., 90 days).
November 4, 2022
Price Range, Min, Max (stable coin)
Price Range: Take a stable coin’s max price over a time interval (e.g., 90 days) minus the stable coin’s min price over the same period.
November 4, 2022
Curve 3Pool Liquidity (currency reserve)
The $USD denominated value deposited DAI, USDC, USDT in the 3Pool at any point in time.
November 4, 2022
Stablecoin NetFlow (volume)
The netflow of stable coin tokens into or out of an address (generally, ‘Genesis Address’ 0x0000000000000000000000000000000000000000); this can be in either token amount or $USD denominated amount over a period of time.
November 8, 2022
Curve Pool Imbalance / Dominance Ratio
The $USD denominated value of a stablecoin deposited proportional to the $USD denominated value in 3CRV Tokens (e.g., LUSD-3CRV ratio)
November 8, 2022
Stablecoin DEX Swap Volume
The volume amount of stablecoin traded (i.e., Buy & Sell) on a DEX over a given time period.
November 8, 2022
Price Slippage
The difference in price quoted vs price received at time of trade.
November 8, 2022
Stablecoin Transaction Demand (value)
The sum of stablecoin value (amount) transferred over a period of time.
November 8, 2022
Stablecoin Distinct Users
A count of distinct “from” addresses that have transferred a stablecoin over a period of time.
November 8, 2022
Trading Volume
Trading volume represents the total number of shares (stocks, securities) traded in a given time period; it is a technical indicator that confirms the existence of a trend [1]. According to Coinbase, trading volume is the total amount of cash or crypto exchanged between buyers and sellers for a cryptocurrency or NFT collection [2]. Similarly, Coinmarketcap’s Alexandria suggests volume is the sum total of actual trades taking place [3].
November 29, 2022
References: 1. Nickolas, Steven (Updated April 01, 2022) Using Trading Volume to Understand Investment Activity. URL: https://www.investopedia.com/ask/answers/041015/why-trading-volume-important-investors.asp 2. Coinbase Help: URL: https://help.coinbase.com/en/coinbase/getting-started/crypto-education/glossary/volume-traded 3. Coinmarketcap Alexandria. URL: https://coinmarketcap.com/alexandria/glossary/volume Messari Proprietary Methods: https://messari.io/report/messari-proprietary-methods
Emissions / Issuance
Token issuance is the process of creating new tokens and adding them to the token supply of a cryptocurrency [1]. There is a release schedule associated with issuance, for example the initial release rate for CRV was 2m CRV per day [2]. The release rate, or emissions, is the speed at which new coins are produced and released. Token projects will generally have a release schedule for the community to view [4]. Messari distinguishes between four different general emission types, as well as more precise categorizations, including[5]: • Burn & Mint • Deflationary • Fixed Supply • Inflationary
November 29, 2022
References: 1. Coinmarketcap Alexandria. URL: https://coinmarketcap.com/alexandria/glossary/token-issuance 2. Curve documentation ($CRV Tokenomics): https://resources.curve.fi/crv-token/understanding-tokenomics 3. Coinmarketcap Alexandria. URL: https://coinmarketcap.com/alexandria/glossary/emission 4. Curve Release Schedule: URL: https://dao.curve.fi/releaseschedule 5. Messari Classifications: URL https://messari.io/report/messari-classifications
Market Share
Market capitalization (aka Market Cap / MCAP) of a cryptoasset is the price ($USD denominated) multiplied by its supply [1]. CoinmarketCap uses a volume-weighted average of prices from multiple exchanges [2]. Relatedly, Bitcoin Dominance is defined as the ratio of Bitcoin’s market capitalization to that of the rest of the cryptocurrency markets [3]. We can define Market Share as the ratio of any cryptocurrency’s market capitalization to that of the rest of the market.
November 29, 2022
References: 1. Messari Metrics. URL: https://messari.io/report/messari-metrics 2. Coinmarketcap Alexandria: URL: https://coinmarketcap.com/alexandria/glossary/market-capitalization-market-cap-mcap Coinmarketcap Alexandria: URL: https://coinmarketcap.com/alexandria/glossary/bitcoin-dominance-btcd
The traditional definition of revenue is money generated from normal business operations, calculated as the average sales price multiplied by the number of units sold [1]. For a service-business, revenue could be the average hourly rate multiplied by billable hours for services rendered. There is less consensus for web3 protocols and communities. Token Terminal defines revenue as the share of fees that goes to the protocol’s treasury or directly to its token holders through a burn mechanism, where a burn mechanism is similar to a stock buyback because it decreases the amount of tokens in circulation [2]. Messari offers a definition more centered on yield [3][4]. For example, defining revenue for Convex Finance, Messari calculates total revenue as a combination of: • Yield generated and harvested from Curve LP pools • Yield generated and harvested from staked cvxCRV • Yield generated and harvested from staked CVX • Yield generated and harvested from locked CVX • Yield generated and harvested from Frax LP pools • Yield generated and harvested from cvxFXS/FXS liquidity pools
November 29, 2022
References: 1. Hayes, Adam (updated Jul 18, 2022) What is Revenue? Definition, Formula, Calculation and Example. Investorpedia URL: https://www.investopedia.com/terms/r/revenue.asp 2. Token Terminal URL: https://tokenterminal.com/terminal/metrics/revenue 3. Messari Dashboard. URL: https://messari.io/protocol/convex-finance 4. Messari Protocol Metrics Subgraph Methodology v1.1.2: https://github.com/messari/subgraphs/blob/master/subgraphs/convex-finance/README.md
Stablecoin Liquidity
Stablecoins are a crucial primitive in DeFi to allow investors to earn yield without being affected by market volatility. Yield farming and liquidity mining involve investors depositing stablecoins to lend or provide liquidity for Automated Market Makers, that uses Liquidity Pools instead of a traditional matching engine; in this scenario, stablecoins are a source of liquidity to facilitate trade. Stablecoins themselves can have liquidity; a popular heuristic being the depth of a Curve pool involving a specific stablecoin (BUSD) and the 3CRV token (comprises USDC, USDT, and DAI) (see “Curve Pool Imbalance”).
November 29, 2022
Stablecoin Liquidity Risk
A liquidity risks are events or circumstances that could cause a shortage in quantity of stablecoins available [1]. This could be due to misalignment in settlement, issuance and redemption times between crypto systems (24/7) and entities with regular business hours (traditional finance).
November 29, 2022
References: 1. Report on Stablecoins (November 2021) President’s Working Group on Financial Markets, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency (US Govt).