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Exactly, 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
by JamesSwift 4y ago
Exactly, 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.