Commodities, Volume 3, Issue 4 (December 2024) – 4 articles

The cryptocurrency market is characterized by extreme volatility, with events such as the Terra-LUNA crash of 2022 raising significant questions about the resilience of algorithmic stablecoins. This paper investigates the collapse of LUNA Classic during the USTC depeg, focusing on the role of trading volumes and collateral assets like Bitcoin in amplifying the price crash. Using a Vector Logistic Smooth Transition AutoRegressive (VLSTAR) model, we analyze daily data from October 2020 to November 2022 to uncover how exogenous volumes influenced LUNA’s price trajectory during the crisis. Our findings reveal that high trading volumes, particularly during regime two (the post-depeg period), significantly exacerbated the price decline, validating the impact of large-scale liquidations on LUNA’s price path. Additionally, Bitcoin volumes played a critical role in destabilizing the system, confirming that the liquidity of underlying collateral assets is pivotal in maintaining price stability. These insights contribute to understanding the systemic vulnerabilities in algorithmic stablecoins and offer implications for future stablecoin design and risk management strategies. They are relevant for investors, policymakers, and researchers seeking to be aware of market volatility and prevent future crises in stablecoin ecosystems. Full article

Property Assessed Clean Energy (PACE) programs finance energy efficiency and renewable energy improvements to residential and commercial properties with a special tax assessment added to property taxes. This paper surveys the literature and documents the quantitative estimates of the environmental and economic benefits. This paper extends to discuss the securitization of PACE loans. The issuance of PACE green bonds frees up capacity for more PACE improvements. In addition, we summarize the concerns raised after the programs have been implemented. Those concerns include consumer protection, audit after program implementation, and lien-related risks for lenders. We discuss those concerns and suggest measures to continue to grow PACE financing. The success of PACE programs will contribute to reducing carbon emissions, mitigating climate change and to achieving six of the seventeen United Nations Sustainable Development Goals (SDGs). Full article

This research paper examines the risks posed by the MIH EV Open platform to German automotive suppliers, in particular, the risk of commoditization and falling into a commodity trap. The term commodity trap describes a situation in which companies dealing with standardized products or services face intense price and margin pressure and struggle to differentiate themselves from competitors. The MIH EV Open platform, established by Foxconn, also known as Hon Hai Precision Industry Co. Ltd., headquartered in Tucheng, Taipei, Taiwan, aims to create a collaborative platform for the comprehensive development of key software, hardware components, and services in the electric vehicle (EV) industry. It unites over 2700 companies from more than 70 countries and fosters collaboration to accelerate the development and market entry of new EV products. This paper analyzes the MIH EV Open business ecosystem model and assesses the strengths and weaknesses of German suppliers in addressing these challenges. This study highlights strategic approaches, including innovation, portfolio adaptation, customer relationships, and sustainability practices, that can enable German suppliers to mitigate commodity trap risks. The findings underscore the importance of proactive, segment-specific strategies amidst the transformation of the automotive industry. Key insights are provided on the potential impact of open platform ecosystems and recommendations for German automotive suppliers to maintain competitiveness. This research fills a gap in the literature by examining the commoditization risks posed by the MIH EV Open platform for German automotive suppliers. Unlike previous studies that focus on traditional market structures, this study explores the novel dynamics introduced by platform ecosystems and provides strategic insights to mitigate these risks. Full article