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There is a very important aspect of opposite pressure. If DAI price ever loses peg and goes to eg 0.90 anyone with open positions immediately starts buying a s
by stepanhruda 5y ago
There is a very important aspect of opposite pressure.
If DAI price ever loses peg and goes to eg 0.90 anyone with open positions immediately starts buying a shitton of them and closing their position, because they just got a 10% discount on paying off their debt, sending the peg back.
If the price ever goes to 1.10, anyone with free capital around immediately starts minting new coins and floods the market with them, because they just got an instant 10% bump on the size of minted capital, sending the peg back.
- thehappypm 5y agoThat’s true if there’s faith it comes back up from $.90. If it starts falling to $.99 then $.98 then $.95 then $.90.. you have to decide if it’s really a dip or the end.
- hjorthjort 5y agoNot really. The point is: there's always someone who has a debt in DAI they need to pay off. If they thought the dip would go even further , they would wait longer, because to them, the DAI does have value: it is what they need to get their hands on to get their collateral back.
- thehappypm 5y agoWhat if they think DAI is going to go to $0?
- darcys22 5y agoThen they would be able to get their ethereum collateral back for free
- stepanhruda 5y agoSure, if more people who hold DAI thought it would than it wouldn’t, it would be a problem. At this point there are so many arbitrage bots and protocols on top that it won’t even budge to 0.95 though, because this incentive balance has proven to be solid. The main downside really is that it’s overcollateralized by assets in 2x or so value.
- Acrobatic_Road 5y agoIf you really believed that Dai was on a crash course to $0, you would be very wise to buy ASAP to pay your dai debts and retrieve your collateral before the crash in Dai crashed Ethereum in tandem causing you to get liquidated.