Do stablecoin hedge exchange rates like gold and bitcoin? Evidence from a QNARDL approach

This study employs the Quantile Nonlinear Autoregressive Distributed Lag (QNARDL) model to systematically examine the asymmetric relationships and hedging effectiveness of the stablecoin (USDT) against major fiat exchange rates under different market conditions, in comparison with gold and Bitcoin hedging assets. The results show that USDT, gold, and BTC all exhibit significant but state-dependent cointegration with major fiat currencies, with USDT demonstrating the most stable and persistent long-run linkage. Asymmetry analysis reveals that USDT responds with strong short-run asymmetry, while gold and Bitcoin display asymmetry mainly in the long run. Hedging analysis further highlights a clear functional hierarchy: USDT’s hedging power is the most conditional—showing effectiveness for all exchange rates during periods of currency appreciation and serving as a safe-haven in episodes of extreme appreciation (0.01 quantiles). It also exhibits a certain degree of lagged response, functioning as a short-term “liquidity buffer”. In contrast, gold acts as an effective hedge during normal appreciation and depreciation phases (0.1, 0.5, 0.9 quantiles) but loses significance under extreme conditions. Bitcoin shows selective long-term hedging ability—partially covering major floating currencies (AUD, CAD, EUR, GBP) but not the CNY or JPY. Overall, this study reveals that the stablecoin (USDT), as a liquidity-anchored asset, fundamentally differs from gold, a long-term value-based asset, and Bitcoin, an extra-sovereign decentralized instrument, in the context of exchange rate risk management, providing differentiated empirical evidence to support more targeted decision-making. JEL Classification: C22, F31, G15, E44, G11