Prague Economic Papers 2026, 35(2):196-220 | DOI: 10.18267/j.pep.909

How the Terra-LUNA Collapse Reshaped Tether's Role in Crypto Market Volatility

Ekin Tokat ORCID..., Hakki Arda Tokat ORCID...
Ekin Tokat, TOBB University of Economics and Technology, Söğütözü Cad. No: 43, 06560, Ankara, Turkey.
Hakki Arda Tokat (Corresponding author), TOBB University of Economics and Technology, Söğütözü Cad. No: 43, 06560, Ankara, Turkey.

This study examines the evolving role of Tether in cryptocurrency market volatility, particularly in the context of the Terra-LUNA collapse. Using a multivariate asymmetric BEKK-GARCH model, we analyze volatility transmission between Tether's trading volume and the return volatilities of Bitcoin and Ethereum. Unlike prior studies that rely on issuance based measures, we employ trading volume volatility as a proxy for real time stablecoin related liquidity dynamics. The results indicate that, in the pre-collapse period, Tether exhibited a stabilizing association with Bitcoin volatility, consistent with its role as a liquidity buffer. Following the Terra-LUNA collapse, this relationship weakens, while evidence of volatility interaction between Tether and Ethereum becomes more pronounced, although this interaction appears sensitive to the sample definition around the crash. Overall, the findings highlight the asset specific and time varying nature of stablecoin related volatility dynamics and underscore how major systemic events can reshape liquidity and volatility transmission within the cryptocurrency markets. The study provides useful insights for regulators and investors as crypto assets become more integrated into traditional financial systems.

Klíčová slova: Tether, Bitcoin, Ethereum, Volatility spillover, Multivariate GARCH models.
Klasifikace JEL: C32, G1, G12

Vloženo: 15. listopad 2025; Revidováno: 10. únor 2026; Přijato: 23. únor 2026; Zveřejněno online: 18. červen 2026; Zveřejněno: 22. červen 2026  Zobrazit citaci

ACS AIP APA ASA Harvard Chicago Chicago Notes IEEE ISO690 MLA NLM Turabian Vancouver
Tokat, E., & Tokat, H.A. (2026). How the Terra-LUNA Collapse Reshaped Tether's Role in Crypto Market Volatility. Prague Economic Papers, 35(2), 196-220. doi: 10.18267/j.pep.909
Stáhnout citaci
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Zobrazit celý článek

    Reference

    1. Adachi, M., Bento Pereira Da Silva, P., Born, A., Cappuccio, M., Czák‑Ludwig, S., Gschossmann, I., Pellicani, A., Philipps, S.M., Plooij, M., Rossteuscher, I., Zeoli, P. (2022). Stablecoins' role in crypto and beyond: Functions, risks and policy. ECB Macroprudential Bulletin 18. European Central Bank
    2. Ante, L., Fiedler, I., Strehle, E. (2021). The influence of stablecoin issuance on cryptocurrency markets. Finance Research Letters, 41, 101867. Přejít k původnímu zdroji...
    3. Ardia, D., Bluteau, K., Rüede, M. (2019). Regime changes in Bitcoin GARCH volatility dynamics. Finance Research Letters, 29, 266-271. Přejít k původnímu zdroji...
    4. Badev, A., Watsky, C. (2023). Interconnected DeFi: Ripple Effects from the Terra Collapse, Finance and Economics Discussion Series 2023-044. Washington: Board of Governors of the Federal Reserve System, https://doi.org/10.17016/FEDS.2023.044 Přejít k původnímu zdroji...
    5. Balcilar, M., Bouri, E., Gupta, R., Roubaud, D. (2017). Can volume predict Bitcoin returns and volatility? A quantiles-based approach. Economic Modelling, 64, 74-81. Přejít k původnímu zdroji...
    6. Bank for International Settlements. (2018). Annual Economic Report 2018: Cryptocurrencies - looking beyond the hype. June 2018
    7. Baur, D.G., Dimpfl, T., (2018). Asymmetric volatility in cryptocurrencies. Economic Letters,. 173, 148-151, https://doi.org/10.1016/j.econlet.2018.10.008. Přejít k původnímu zdroji...
    8. Baur, D. G., Dimpfl, T., Kuck, K. (2018). Bitcoin, gold and the US dollar-A replication and extension. Finance Research Letters, 25, 103-110. Přejít k původnímu zdroji...
    9. Behrens, A. (2021). USD Coin and AMMs: The Role of USDC in DeFi Trading. (Retrieved 2025-02-04) Available at https://www.circle.com/blog/usd-coin-and-amms-the-role-of-usdc-in-defi-trading?
    10. Bollerslev, T., Engle, R., Wooldridge, J. (1988). A Capital Asset Pricing Model with Time-Varying Covariances. Journal of Political Economy, 96(1), 116-131. Přejít k původnímu zdroji...
    11. Bonelli, M. (2016). Stock Market Volatility Dynamics: A Volume Filtered-GARCH Model. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2743170 Přejít k původnímu zdroji...
    12. Bouri, E., Molnár, P., Azzi, G., Roubaud, D., Hagfors, L. I. (2017). On the hedge and safe haven properties of Bitcoin: Is it really more than a diversifier? Finance Research Letters, 20, 192-198. Přejít k původnímu zdroji...
    13. Chaim, P., Laurini, M. P. (2018). Volatility and return jumps in bitcoin. Economics Letters, 173, 158-163. Přejít k původnímu zdroji...
    14. Ciaian, P., Rajcaniova, M., Kancs, D. (2018). Virtual relationships: Short- and long-run evidence from Bitcoin and altcoin markets. Journal of International Financial Markets, Institutions and Money, 52, 173-195. Přejít k původnímu zdroji...
    15. Corbet, S., Lucey, B., Urquhart, A., Yarovaya, L. (2019). Cryptocurrencies as a Financial Asset: A Systematic Analysis. International Review of Financial Analysis, 62, 182-199, https://doi.org/10.1016/j.irfa.2018.09.003 Přejít k původnímu zdroji...
    16. Corbet, S., Hou, Y., Hu, Y., Larkin, C., Lucey, B., Oxley, L. (2022). Cryptocurrency liquidity and volatility interrelationships during the COVID-19 pandemic. Finance Research Letters, 45, 102137. Přejít k původnímu zdroji...
    17. De Blasis, R., Galati, L., Webb, A., Webb, R. I. (2023). Intelligent design: stablecoins (in)stability and collateral during market turbulence. Financial Innovation, 9(85), 1-23, https://doi.org/10.1186/s40854-023-00492-4 Přejít k původnímu zdroji...
    18. Dwyer, G. P. (2015). The economics of Bitcoin and similar private digital currencies. Journal of Financial Stability, 17, 81-91. Přejít k původnímu zdroji...
    19. Dyhrberg, A. H. (2016). Hedging capabilities of bitcoin. Is it the virtual gold?. Finance Research Letters, 16, 139-144, https://doi.org/10.1016/j.frl.2015.10.025 Přejít k původnímu zdroji...
    20. Engle R F. (1982). Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation. Econometrica, 50(4), 987-1007. Přejít k původnímu zdroji...
    21. Engle, R. F., Kroner, K. F. (1995). Multivariate Simultaneous Generalized Arch.. Econometric Theory, 11(1), 122-150. Přejít k původnímu zdroji...
    22. European Systemic Risk Board. (2025). Crypto-assets and decentralised finance. October 2025
    23. Financial Stability Board. (2023). The Financial Stability Risks of Decentralised Finance. February 2023
    24. Gkillas, K., Katsiampa, P. (2018). An application of extreme value theory to cryptocurrencies. Economics Letters, 164, 109-111. Přejít k původnímu zdroji...
    25. Griffin, J. M., Shams, A. (2020). Is Bitcoin really untethered? The Journal of Finance, 75(4), 1913-1964. Přejít k původnímu zdroji...
    26. IMF (2025). Crypto Assets Monitor, October 2025
    27. Karpoff, J. M. (1987). The relation between price changes and trading volume: A survey. Journal of Financial and Quantitative Analysis, 22(1), 109-126, https://doi.org/10.2307/2330874. Přejít k původnímu zdroji...
    28. Katsiampa, P. (2017). Volatility estimation for Bitcoin: A comparison of GARCH models. Economics Letters, 158, 3-6, https://doi.org/10.1016/j.econlet.2017.06.023 Přejít k původnímu zdroji...
    29. Katsiampa, P. (2018). Volatility co-movement between bitcoin and ether. Finance Reserach Letters, 30, 221-227, https://doi.org/10.1016/j.frl.2018.10.005 Přejít k původnímu zdroji...
    30. Katsiampa, P., Corbet, S., Lucey, B. (2019). Volatility spillover effects in leading cryptocurrencies: A BEKK-MGARCH analysis. Finance Research Letters, 29, 68-74. https://doi.org/10.1016/j.frl.2019.03.009 Přejít k původnímu zdroji...
    31. Kristoufek L. (2022). On the role of stablecoins in cryptoasset pricing dynamics. Financial Innovations, 8(1), 1-26, https://doi.org/10.1186/s40854-022-00343-8 Přejít k původnímu zdroji...
    32. Kroner, K. F., Ng, V. K. (1998). Modeling Asymmetric Comovements of Asset Returns. Review of Financial Studies, 11, 817-844, https://doi.org/10.1093/rfs/11.4.817 Přejít k původnímu zdroji...
    33. Kyle, A. S. (1985). Continuous Auctions and Insider Trading. Econometrica, 53(6), 1315-1335, https://doi.org/10.2307/1913210 Přejít k původnímu zdroji...
    34. Lee, S., Lee, J., Lee, Y. (2023). Dissecting the Terra‑LUNA crash: Evidence from the spillover effect in cryptocurrencies and information flow. Finance Research Letters, 53, 103590. Přejít k původnímu zdroji...
    35. Nicolle, E. (2025). JPMorgan to allow Bitcoin, Ether as collateral in crypto push. (Retrieved 2025-10-24) Available at: https://www.bloomberg.com/news/articles/2025-10-24/jpmorgan-to-allow-bitcoin-ether-as-collateral-in-crypto-push
    36. Özdemir, A. (2022). Cue the volatility spillover in the cryptocurrency markets during the COVID-19 pandemic: evidence from DCC-GARCH and wavelet analysis. Finanical Innovation, 8(12), 1-38, https://doi.org/10.1186/s40854-021-00319-0 Přejít k původnímu zdroji...
    37. PR Newswire. (2025). Zelle goes international: Early Warning expands $1T payments network with stablecoin initiative. (Retrieved 2025-10-24) Available at: https://www.prnewswire.com/news-releases/zelle-goes-international-early-warning-expands-1t-payments-network-with-stablecoin-initiative-302593440.html
    38. Schär, F. (2021). "Decentralized Finance: On Blockchain- and Smart Contract-Based Financial Markets," Review, Federal Reserve Bank of St. Louis, vol. 103(2), 153-174, April. https://doi.org/10.20955/r.103.153-74 Přejít k původnímu zdroji...
    39. Tauchen, G. E., Pitts, M. (1983). The price variability-volume relationship on speculative markets. Econometrica, 51(2), 485-505, https://doi.org/10.2307/1912002 Přejít k původnímu zdroji...
    40. The White House. (2025). President Donald J. Trump establishes the Strategic Bitcoin Reserve and U.S. Digital Asset Stockpile. (Retrieved 2025-03-20) Available at: https://www.whitehouse.gov/fact-sheets/2025/03/fact-sheet-president-donald-j-trump-establishes-the-strategic-bitcoin-reserve-and-u-s-digital-asset-stockpile/
    41. Troster, V., Tiwari, A. K., Shahbaz, M., Macedo, D. N. (2019). Bitcoin returns and risk: A general GARCH and GAS analysis. Finance Research Letters, 30, 187-193, https://doi.org/10.1016/j.frl.2018.09.014 Přejít k původnímu zdroji...
    42. Wang, J. (2002). Trading volume and asset prices. Annals of Economics and Finance, Society for AEF, 3(2), 299-359.
    43. Wei, W. C. (2018). The impact of Tether grants on Bitcoin. Economics Letters, 171, 19-22. Přejít k původnímu zdroji...

    Tento článek je publikován v režimu tzv. otevřeného přístupu k vědeckým informacím (Open Access), který je distribuován pod licencí Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY NC ND 4.0), která umožňuje nekomerční distribuci, reprodukci a změny, pokud je původní dílo řádně ocitováno. Není povolena distribuce, reprodukce nebo změna, která není v souladu s podmínkami této licence.


    Zpět na obsah