Can Stablecoins Maintain Parity with USD: A Look at Tether (USDT), TrueUSD (TUSD), & Paxos Standard (PAX)

In this analysis, we look at three stablecoins to examine which has been able to best maintain an equal exchange-rate with the dollar. We examine Tether (USDT), True USD (TUSD), and Paxos Standard (PAX).

Tether

Tether is the largest stablecoin, having a market capitalization value of $2,191,261,067. We are going to analyze the price movement from Jun 2018 to Apr 2019 to see if it has significantly deviated from the dollar.

On Apr 9, 2019, the price of USDT/USD was $1.007. Since Jun 2018, the price has mostly traded between $0.975 and $1.025, a swing of 2.5% in either direction. However, there have been significant fluctuations. The lowest price recorded was $0.869 on Oct 15, 2018. Conversely, the highest price recorded was $1.055 on Apr 2. In order to measure the value of these fluctuations, we are going to use the standard deviation. The solid red line is drawn at 0.006 standard deviations away from the mean. The standard deviation (measured from the most recent 20 periods) has been less than 0.006 away from the mean for the majority of our selected period. It moved above on Oct 2018, before falling below again on Jan 2019. During this time, the highest value recorded was 0.015. The price traded above 0.006 standard deviations away from the mean for a total of 78 days.

True USD

True USD is a stablecoin with a market capitalization of $200,061,207. We are going to analyze the price movement from Jun 2018 to Apr 2019 to see if it has significantly deviated from the dollar.

On Apr 9, 2019, the price of TUSD/USD was $0.998 Since Jun 2018, the price has mostly been trading between $0.985 and $1.015. A swing of 1.5% in either direction. However, there have been some fluctuations. The lowest price recorded was $0.958 on Aug 28, 2018. Conversely, the highest price recorded was $1.099 on Oct 14, 2018. In order to measure these fluctuations, we are going to use the standard deviation. The solid red line is drawn at 0.006 standard deviations from the mean. The standard deviation (measured from the most recent 20 periods) has been below 0.006 away from the mean for the majority of our selected period. However, the standard deviation was above the mean during three periods:

1. July – August 2018
2. October – Novemeber 2018
3. November – December 2018.

Summing these periods we get a total of 79 days of trading with more than 0.006 standard deviations away from the mean. During this time, the highest value recorded was 0.0201.

Paxos Standard

Paxos Standard is a stablecoin has a market capitalization of $108,327,19. We are going to analyze the price movement from Dec 2018 to Apr 2019 to see if it has significantly deviated from the dollar.

On Apr 9, 2019, the price of PAX/USD was $1.003 Since Dec 2018, the price has mostly been trading between $1 and $1.04. A swing of 4% upward. It is interesting that the price of PAX has never dropped below $1. The lowest price recorded was $1 on Apr 3, 2019. Conversely, the highest price recorded was $1.056 on Mar 6, 2018 In order to measure the amount of fluctuations, we are going to use the standard deviation. The solid red line is drawn at 0.006 standard deviations from the mean. The standard deviation (measured from the most recent 20 periods) has been below 0.006 away from the mean for the majority of our selected period. It was above in two periods:

1. January 12 – January 21, 2019
2. February – March 2019

Summing these periods we get a total of 33 days of trading with more than 0.006 standard deviations away from the mean. During this time, the highest value recorded was 0.01. However, the data for PAX only stretches for only 126 days, compared to 303 for tether and 312 for True USD. Therefore, we transform the data by using a date ratio (307/126) and multiplying it with 33. We get a total of 79 days trading more than 0.006 standard deviations away the mean.

Summary of Analysis

To determine which stablecoin has maintained closest parity to USD, let’s compare the result above:

TrueUSD

TrueUSD has long periods in which maintains relative parity to the dollar. However, it also has extremes values which skew the data significantly, as evidenced by the fact that it traded 0.0201 SD away from the mean for a short period of time.

Tether

Conversely, the highest that Tether has traded away from the mean was 0.015. While Tether fluctuates more than TrueUSD, the limits are smaller and the price reverts back in a short period of time. As mentioned above, it never traded more than 0.015 standard deviations away from the mean.

Paxos Standard

Paxos Standard has the least amount of fluctuations. While the time in which it traded more than 0.006 standard deviations away from the mean is the same as Tether and True USD, the fluctuations were much smaller. This was evidenced by the maximum value reached of 0.01, compared to 0.015 and 0.02 for tether and True USD respectively. This has occurred in part due to the fact that PAX has never traded below $1. To summarize, our analysis found that the stablecoin PAX has achieved the closest parity to the dollar, followed by Tether and True USD. Disclaimer: This article is not trading advice and should not be construed as such. Always consult a trained financial professional before investing in cryptocurrencies, as the market is particularly volatile.