arXiv subjects

Hongzhe Wen

Publications and source records attributed to Hongzhe Wen.

3 recordsLinked to original sources

arXiv2025

How Digital Asset Treasury Companies Can Survive Bear Markets: The Case of the Strategy and Bitcoin

Digital Asset Treasury (DAT) companies, public firms that hold large crypto reserves as a core strategy, deliver levered exposure to digital assets but face acute downside risk when equity premia over net asset value multiples (mNAV) compress in bear markets. This paper develops a survival framework that couples conservative treasury policy with an operating line that monetizes holdings independent of mark-to-market gains. Using Strategy (formerly MicroStrategy) as a case, we propose a "BTC-to-sats" payments rail that allocates a small, risk-capped liquidity sleeve of the treasury to Lightning Network channels, generating price-agnostic fee revenue (acquiring bps, routing, hedge/FX spread) while keeping settlement exposure near zero beta to BTC. We formalize a no-forced-sale condition and show how disclosed KPIs allow investors to test whether operating cash flows can bridge an 18 to 24-month bear without liquidations. The feasibility of the rail is supported by Strategy's Lightning initiative and empirical Lightning performance. Our model generalizes across DAT types and provides implementable disclosures that can sustain an mNAV premium through cycles.

q-fin.GN↗

arXiv2025

Stablecoins and the Emerging Hybrid Monetary Ecosystems

With market capitalization exceeding USD250 billion by mid-2025, stablecoins have evolved from a crypto-focused innovation into a vital component of the global monetary structure. This paper identifies the characteristics of stablecoins from an analytical perspective and investigates the role of stablecoins in forming a hybrid monetary ecosystem where public (fiat, CBDC) and private (USDC, USDT, DAI) monies coexist. Through a number of econometric analysis models, we find that stablecoins maintain strong peg stability, while each type exhibiting distinctive responses to market variables such as trading volume and capitalization depending on the mechanisms behind. We also introduce a hybrid system design that proposes a two-layer structure, which private stablecoin issuers are backed by central bank reserves, ensuring uniformity, security, and programmability. This model takes advantages of both decentralized finance and payment innovation, while utilizing the Federal Reserve's institutional trust. A case study on the SVB-USDC de-peg event in 2023 illustrates how such a hybrid system could have prevented panic-induced instability through transparent reserves, secured liquidity, and interoperable assets. Through examination of the Dybvig model and simulation, we conclude that a hybrid monetary model not only enhances financial inclusivity, scalability, and dollar utility in digital ecosystems, but it also strengthens systemic resilience, offering a credible blueprint for future digital dollar architectures.

q-fin.GN↗

arXiv2025

A Risk Mitigation Model of Monetary Ecosystem with Stablecoins

Stablecoins have emerged as a significant component of global financial infrastructure, with aggregate market capitalization surpassing USD250 billion in 2025. Their increasing integration into payment and settlement systems has simultaneously introduced novel channels of systemic exposure, particularly liquidity risk during periods of market stress. This study develops a hybrid monetary architecture that embeds fiat-backed stablecoins within a central bank-anchored framework to structurally mitigate liquidity fragility. The proposed model combines 100 percent reserve backing, interoperable redemption rails, and standing liquidity facilities to guarantee instant convertibility at par. Using the 2023 SVB USDC de-peg event as a calibrated stress scenario, we demonstrate that this architecture reduces peak peg deviations, shortens stress persistence, and stabilizes redemption queues under high redemption intensity. By integrating liquidity backstops and eliminating maturity-transformation channels, the framework addresses run dynamics ex ante rather than through ad hoc intervention. These findings provide empirical and theoretical support for a hybrid stablecoin-CBDC architecture that enhances systemic resilience, preserves monetary integrity, and establishes a credible pathway for stablecoin integration into regulated financial systems.

q-fin.RM↗