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As you say, there’s reason to be very skeptical of their collateral. We know 9% of market cap has been paid out in a matter of days. If they were only, say, 10%
by pavlov 4y ago
As you say, there’s reason to be very skeptical of their collateral. We know 9% of market cap has been paid out in a matter of days. If they were only, say, 10% collateralized by liquid assets, then they would be on the edge of collapse right now. That may be pessimistic but we can’t know because they don’t provide audited reports.
- JamesSwift 4y agoExactly, thats the thing people seem to look past. A stable-coin could theoretically be entirely stable up until they were absolutely insolvent. They just allow redemption and treat everything as business as usual until their collateral runs out. Then they close up shop and everyone else gets 0.
- FabHK 4y agoPlus: Say everyone assumes that USDT is about 60% collateralised with very liquid stuff, and everyone holding USDT is comfortable with that undercollateralisation. Now USDT has just lost 10% market cap, so now they're just 55% collateralised (before: 60/100, now: 50/90). You might still be comfortable with that cushion, but some people might not. They'll redeem their USDT. Etc., we have a classic bank run.