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Nope, people do not hold USD because they expect a gain. They are willing to pay the inflation penalty because holding the dollars in question provides them so

Nope, people do not hold USD because they expect a gain. They are willing to pay the inflation penalty because holding the dollars in question provides them something. Generally that means either a sense of security or liquidity on short notice. Holding dollars is paying a fee for liquidity.

deleted 5y ago
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nightski 5y ago
Does it really make sense to hold USD if your only goal is liquidity? Maybe if you need it immediately, but honestly stocks and some other investments can usually be sold with the money accessible in seconds (or you can use credit). Really what I feel the value prop is for cash is low volatility (aka security as you mentioned). With low inflation like we have seen in the past, risk adjusted it might be a better spot to hold that money relative to other investments. So yes, I hold a small portion of my portfolio in USD for that gain. If it was not providing that low volatility (inflation spikes like crazy), then I'd be much less inclined to keep my money in USD outside of the minimum I'd need for immediate spending. Because returns are low. So the "gain" is in the risk adjusted return relative to other assets (which could ultimately be slightly negative).
- hackingforfun 5y ago
  I don't think you can sell traditional investments like stocks in seconds unless it is within designated trading hours. Crypto you can trade 24/7, although fiat wires out to traditional bank accounts still operate within certain hours (at least in the US, maybe this is different elsewhere). I still hold a small amount of my portfolio in USD, even considering inflation, but this is because it's less volatile than crypto, and I think holding actual cash is better than holding a stablecoin.
  - deleted 5y ago
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  - arcticbull 5y ago
    Stablecoins have counter-party risk. USDT is run by folks under investigation by the DOJ for bank fraud and was at various times not actually backed (sometimes by anything). And the scuttlebutt is USDC is currently under investigation by the SEC. [1] [1] https://ca.finance.yahoo.com/news/public-filing-from-crypto-company-circle-reveals-ongoing-sec-investigation-134752992.html https://ca.finance.yahoo.com/news/public-filing-from-crypto-...
    - hackingforfun 5y ago
      I agree. I intentionally don't hold stablecoins. As I mentioned I'd rather hold actual cash. One nice thing about stablecoins is they can be transferred around the world 24/7, and there are various high APRs for lending out stablecoins (not without risk, of course, there's nothing like FDIC insurance on those). Anyway, I'm surprised how much trust the crypto community puts in Tether.

deleted 5y ago

[deleted]

nightski 5y ago

Does it really make sense to hold USD if your only goal is liquidity? Maybe if you need it immediately, but honestly stocks and some other investments can usually be sold with the money accessible in seconds (or you can use credit). Really what I feel the value prop is for cash is low volatility (aka security as you mentioned). With low inflation like we have seen in the past, risk adjusted it might be a better spot to hold that money relative to other investments. So yes, I hold a small portion of my portfolio in USD for that gain. If it was not providing that low volatility (inflation spikes like crazy), then I'd be much less inclined to keep my money in USD outside of the minimum I'd need for immediate spending. Because returns are low. So the "gain" is in the risk adjusted return relative to other assets (which could ultimately be slightly negative).

hackingforfun 5y ago
I don't think you can sell traditional investments like stocks in seconds unless it is within designated trading hours. Crypto you can trade 24/7, although fiat wires out to traditional bank accounts still operate within certain hours (at least in the US, maybe this is different elsewhere). I still hold a small amount of my portfolio in USD, even considering inflation, but this is because it's less volatile than crypto, and I think holding actual cash is better than holding a stablecoin.
- deleted 5y ago
  [deleted]
- arcticbull 5y ago
  Stablecoins have counter-party risk. USDT is run by folks under investigation by the DOJ for bank fraud and was at various times not actually backed (sometimes by anything). And the scuttlebutt is USDC is currently under investigation by the SEC. [1] [1] https://ca.finance.yahoo.com/news/public-filing-from-crypto-company-circle-reveals-ongoing-sec-investigation-134752992.html https://ca.finance.yahoo.com/news/public-filing-from-crypto-...
  - hackingforfun 5y ago
    I agree. I intentionally don't hold stablecoins. As I mentioned I'd rather hold actual cash. One nice thing about stablecoins is they can be transferred around the world 24/7, and there are various high APRs for lending out stablecoins (not without risk, of course, there's nothing like FDIC insurance on those). Anyway, I'm surprised how much trust the crypto community puts in Tether.