Stablecoins

Let's discuss stablecoins. I have been hearing a lot - both positive and negative - about them lately. What stablecoins do you prefer? What's the reason you're using a specific one?

Feel free to share your thoughts on:

• Tether
• TrueUSD
• USDC
• Gemini
• MarkerDAO

or any other Stablecoin!

 

Tether, highest Marketcap

 

Can you elaborate?

 

@Izad @Max_zerk
Tether is not good. they are no longer backed by anything. It used to be backed by dollar but after SEC investigated to see if they held reserves equal to their tether in circulation, tether Lawyers changed the policy secretly stating one tether is now equal to one tether. Essentially a marketing bait and switch where initially it was backed now its not but people think it is and treat it as $1.

 

Fantastic question. My stance on stablecoins (there are many forms of stable coins), and for those who don't know what they are. It is essentially crypto currency which is pegged to a real world asset/currency like gold and the euro. My stance is stable coins are flawed to an extent. You need the asset to back up the coin. So I was part of a real estate backed coin/token. There was a similar flaw there as well. They mentioned the coin is backed by the property but what happens if your coin's are backed by $1 million in asset and suddenly the coin (as alt coins do during ICO's) jumps from $1 million (at $1 a coin) to $100 million ($10 a coin)? where does the company have $99 million asset readily available to back the coin? tether faced a similar dilemma. you see the flaw here is that for one there is no need for a coin like that because it's an extension of the currency itself. problem with this model: expense. To issue one dollar’s worth of Tether to you or me, the platform must attract one dollar of investment capital from you or me, and place it in a dollar bank account. One of us then will have traded a perfectly liquid dollar, supported by the full faith and credit of the US government, for a cryptocurrency with questionable backing that is awkward to use. This exchange may be attractive to money launderers and tax evaders, but not to others. In other words, it is not obvious that the model will scale, or that governments will let it.

My main view is stable coins are not vehicles of investment, they are not meant to appreciate in value so their demand in the future is not going to be as attractive because it's not really safe if you think about the real purpose of crypto is to move away from centralized banking and the Dollar. When the Dollar fails so does the stables coins (tether) associated with it. Bitcoin as volatile as it maybe. Is the more opportunistic and attractive coin for the large audience. I don't feel people will go out of their way to buy a dollar for a virtual dollar with no returns. And if they were to buy gold, they would just buy gold straight and not a coin claiming to back it. The US dollar has and other currencies have been on a decline as they have lost much of their value in the past decades. This will reflect on the stable coin. Since it's buying power is pegged to a dollar (for example). The dollar might be the status quo today but it won't be the case tomorrow.

 

Thank you for your very detailed reply!

That's exactly what I've heard. Tether's credibility is decreasing but I never really understood why. How come it's not backed by USD anymore?

 

It's creditability is decreasing because whenever you let a company take on a function of government you always end up wit this situation. The US govt did investigations on them and they found the claim that tether had dollar reserves equal to that of what their coin was in circulation was proven to be false. So the tether secretly changed their policy to state it's not backed by dollar but instead backed by itself. So one tether is equal to one tether since it's marketing was originally 1 tether is equal to 1 dollar people still treat is as such even though it is no longer true.

 

I understand. What stablecoin would you recommend in alternative to tether?

 

USDC as it is more regulated.

 

Forgive the probably stupid question but what exactly is the function/point of a coin which never changes in price? Isn't it just a dollar at that point?

 

I use it when trading. For example, now I expect BTC to drop to below 10k so I swapped btc for tether. When BTC start rising again I'll swap back

 

It is a means of having quick stability and easier liquidity in your crypto portfolio. Imagine the volatility of crypto such as btc. your btc turns to 50k tonight and tomorrow it will be 10k so instead of cashing out the btc out of the exchange or having problems with your bank and so forth you take the btc out of the exchange and transfer to USDC to essentially act as a means to enter and exit the crypto market without banking constraints. Also is a means to move money around without having to answer to the IRS or other agencies or banks.