Stablecoin Deep Dive - Assignment

Look into the stablecoins I’ve mentioned and let’s share some opinions in the forum. What do you think about Tether’s reserves? Do you think USDT creates an existential risk to crypto? What is your favorite stablecoin? Looking at DAI Stats, we can see that a significant amount of the collateral backing DAI is USDC. Do you think this makes DAI more, or less secure than if it were backed by, something like ETH? Sound off in the forum and let’s talk about it.

It’s pretty feral that CEXes still use USDT as a primary trading pair for a lot of their primary trading pairs.

I mulled on the concept quite a bit. My initial thoughts were that when USDT collapses, so will the rest of the crypto market in some pseudo black-swan event. :swan:
The thought was that if USDT has printed billions of tokens on their own accord and continued to buy up the supply of BTC/ETH etc. then these coins would need to undergo a period of price discovery again without fake dollars pumping the price.

Earlier in 2021 when they were to release the reports to the New York Attorney General, I was counting holding my breath for the big crypto crash. And then several months later they released that laughable 1 or 2 page ‘report’ that showed USDT was backed by like ~3% of cash reserves. :laughing:
Nothing happened, and it held its peg just fine.

But now instead, I think maybe the crash of USDT would be a good thing for crypto prices. :partying_face:
Should there be some bank run on USDT (and I still think it’s inevitable), what are people going to trade their exit out of USDT to?
…other tokens.

So you have an instance of tens of billions of dollars buying up all the supply of crypto on the market.
Sure, USDT would lose its peg, but I think you’d see a whopping big green candle on all your fav tokens. :green_heart: :green_circle: :green_book: :green_apple: :leafy_green: :green_square: :evergreen_tree:

Looking forward to seeing what happens. Might not be for a while, but I’ve stopped losing sleep over it :sleeping:

USDC is my favourite stablecoin.

I’m no fan of DAI being backed by multiple assets - INCLUDING Tether :man_facepalming:

I haven’t sat on it for very long, but I think sticking with SAI - the single-asset collateral (ETH) would be a better move.
Or just being wayy more selective in what’s allowed to back it.

But pls, I’d love people to explain why I’m wrong. I don’t have strong opinions on this.

It’s somewhat a socially enforced construct and if the house of cards begin to fall, you have the best chance surviving when you’re backed by sound assets. And ETH is about as sound as it gets in crypto-land, seeing as if ETH drops, everything built upon it likely will (except for maybe the centralized stablecoins).

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Interesting topic…I think a stablecoin that is supposed to represent and be pegged in value to a synthetic FIAT asset should be backed 100% by that asset (similar to 1 PaxGold token being backed by 1oz of physical gold in a vault) otherwise there is risk that the asset is undercollateralized and is somewhat replicating the fractional reserve system that currently exists. However, the free market will decide over time what risk/reward/safety we are all willing to accept in a stablecoin (if they are indeed necessary). Of all of the stablecoins mentioned I prefer USDC for now, but I also recognize that it is not 100% backed. Crypto investing in general requires a certain element of risk that comes with the unregulated nature of it, so at this stage of it’s evolution it would be naive to think there is a perfect solution. For now, my hope is that we stop valuing assets in USD in the future and start measuring value in Satoshi’s, ETH or some other form of decentralized value that can’t be interfered with by governments, bureaucrats or centralized organizations.

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I think the value of Tether’s reserves depends on the future of the crypto market and what regulation is imposed by the feds. I have no doubt in my mind that we are moving towards a Digital financial system within the next ten years, where paper currency will be no more. Although I do not have a favourite stablecoin, I have felt reasonably comfortable using USDC.

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Tether skeeves me out. The fact that all the centralized exchanges, that I’ve used, rely on USDT to create trading pairs, is disturbing. How can so many people have trust in the Tether organization when they haven’t earned it? As jak described, I used to think that the inevitable collapse of Tether would destroy the crypto market, which could still happen due to fear, however, most people would just want to get rid of their Tether and would probably buy anything else possible.
Regardless, CEXs need to make to switch to alternative, and I think it should be TUSD as they are fully transparent. Decentralized stablecoins are currently too volatile (relatively). I personally feel comfortable using USDC, as it is tied to the reputation of Coinbase, however most CEXs would probably have an issue giving the power of the stablecoin market to their competitor.

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Tether leaves many question marks. USDT can create existential crisis for crypto. My favorite stable coin is DAI. Complicated question, depends on who you trust. DAI backed by USDC is safer if you trust traditional financial institutions over decentralized blockchains. DAI backed by eth is safer if you trust vice-versa.

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To echo what others have said, I don’t like the idea of a stable coin being tied to FIAT. In my opinion, it makes the coin more centralized by proxy as it allows pricing to be dictated by governments and bureaucracies. Being backed by Satoshi’s or ETH feels like a better option as it’s being backed by decentralized, but staying power cryptos.

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My favorite stable coins are USDC and DAI, but I don’t like the idea of a stable coin being tied to FIAT. USDT can create existential crisis for crypto in my opinion. Crypto investing in general requires a certain element of risk that comes with the unregulated nature of it.

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Cryptocurrencies (at least some of them) shouldn’t stay volatile forever. So hopefully stablecoins are just a necessary evil in the short term.
It seems that tether has a sketchy reputation, and I suppose the lack of transparency in what is backing it is troublesome. I think that tether will lose ground to other stablecoins and so it won’t become a crisis for crypto. I only hope that other stablecoins will be able to continue to have a proper reserve as they keep growing.
Dai being backed by centralized stablecoins seems to reduce it’s decentralized nature. At the same time, perhaps there is some benefit to having some backing from stable assets as opposed to volatile ones like eth.

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Tether FUD again in a close future?

The “Tether FUD” has been around for a while now, but in my personal opinion that doesn´t seems to impact the markets. In the PDF Tether released regarding the backing of the USDt, we can observe that only 3.87% of the Cash & Cash equivalents sections is really Cash. That it´s one of the cons I see on Tether.
I think that USDT might pose a threat to the Crypto Industry. And I can support my statement by working out this hypothesis: If both (the US regulators and the US government) begin to inquire into Tether, they could be in serious problems:

  1. Referring to the backing of all the USDT on circulation, they allegedly say they are totally cash backed
  2. Market Prices manipulation
By market manipulation (pumping prices up), I refer when tether minted new coins it was always followed by BTC moving up. Here you can see the [Study](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3195066)
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I think we would see a big market crash if something happens to USDT, but we would definitely decouple from tether. And I agree with you in preferring USDC, I like it more haha

And regarding the multi-asset collateral, I think it´s cool, but I think the DAO shouldn´t allow centralize coins control by central entities to be used as collateral. It gives this centralize Entities a significant control over the protocol. For example, at the time of the writing 42.6% of DAI generate by collateral is backed by USDC. If something happens to USDC, DAI will fall without doubt.

We are at a very young market, we need to see where are we heading and act accordingly.
All of the above is what I think at the present moment

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I agree about USDT, at some point something is going to go bad with it, dont know what and dont know when… that said, I do need to change some, lol

I prefer USDC over tether but now learning more about BUSD backing and using BSC more, that could be a good option.

I would prefer my stable coin to be backed by dollar funds, especially rather than ETH or other asset as they are fine while the sun shines and the direction is up but what about on the way back down again

I think we would see a crash but depending on what happened I am pretty certain that everyone would find other stable coins to sure up in or even large caps and the market would bounce back quick with those safely in others buying the dip frantically

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Yes indeed I agree with your thought, but I not sure about how can we reduce the volatility of one asset, and make it simulate the price of a FIAT currency.