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We conduct the first comprehensive study of blockchain currencies, stablecoins pegged to traditional currencies and traded on decentralized exchanges. Our findings reveal that the blockchain market generally operates efficiently, with blockchain prices and trading volumes closely aligned with those of their traditional counterparts. However, blockchain-specific factors, such as gas fees and Ethereum volatility, act as frictions. Blockchain prices are determined by macroeconomic fundamentals and order flow. We use a rich transaction-level database of trades and link it to the characteristics of market participants. Traders with significant market share and access to the primary market have a greater impact on pricing, likely due to informational advantages.
Ranaldo et al. (Mon,) studied this question.