Abstract
In a survey to a random group of anonymous participants of Ethereum trading market, one of the most active cryptocurrency trading markets, 60% of the respondents prefer stablecoin over the U.S. dollar despite that stablecoin and dollar are believed to share many similarities in terms of functions of money. Further investigations demonstrate that this preference cannot be explained from the perspective of standard asset pricing arguments including risk-return trade-off and portfolio diversification. We show that the expected return of holding stablecoin is almost zero while the variance of return is significantly larger than that of the dollar. Stablecoin also cannot help improve the efficiency of the portfolio which already includes the U.S. dollar as a financial asset. We find the psychological factors such as the interest in new technology and the preference for political liberty might help explain this preference.
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