Why Might a Derivatives Exchange Accept a Volatile Cryptocurrency as Collateral Instead of a Stablecoin with High Run Risk?

An exchange might accept a volatile cryptocurrency (like BTC or ETH) as collateral if the perceived run risk of the stablecoin is higher than the volatility risk of the crypto asset. The crypto asset, while volatile, has an independently valued market price and deep liquidity.

If a stablecoin has a high run risk, a depeg could lead to a sudden, near-total loss of collateral value. By contrast, a volatile crypto collateral allows the exchange to manage risk through dynamic margin requirements and frequent liquidations, relying on the asset's underlying market depth.