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Any stablecoin that is NOT backed 1-1 by fiat, correct? I.e., algorithmic stables. If you're 100% collateralized by USD in your bank account, how can it get de-

Any stablecoin that is NOT backed 1-1 by fiat, correct? I.e., algorithmic stables. If you're 100% collateralized by USD in your bank account, how can it get de-pegged?

mathgenius 4y ago
With leverage you can long or short more than the available supply of tethers. You are effectively creating fake tether with leverage, and then selling it (or buying it). This stuff also happens with equities, commodities, etc. If there was no leverage, then yes, a 1:1 backed stablecoin would hold it's value. EDIT: I mean the story here is far from clear, you also need to consider arbitrage bots that act between exchanges, etc. etc.
- qeternity 4y ago
  This isn’t even remotely true. You’re conflating 3 or 4 things with this mistaken understanding.
- UncleEntity 4y ago
  Even with leverage one would assume that a 1:1 backed asset would survive intact with the people loaning out their coins taking the losses in the case of a run. If they engage in fractional reserve issuance (which it appears they do) then all holders of the coin will be subject to losses if they can’t cash out before the reserves run out. Pretty much guaranteed run by that point.
jandrese 4y ago
Are there any 1-1 fiat stablecoins that aren't just flat out lies? Like every new crypto coin minted requires a matching real dollar to be stashed away. My impression is that nobody does this because it would mean massive waits to buy the crypto coins when the real dollars run low and because the way to make real money is with leverage.
- gringoDan 4y ago
  USDC is legit: https://www.centre.io/usdc-transparency https://www.centre.io/usdc-transparency
  - rapsey 4y ago
    Current market cap is 52 billion. Just where is that money?
    - thebean11 4y ago
      Held by Circle and Coinbase in T bills I believe. edit: more likely held by some holding company controlled by those two companies.
    - scrlk 4y ago
      Apparently with BlackRock and BNY Mellon: https://decrypt.co/97795/blackrock-handle-circle-usdc-cash-reserves-400m-funding-round https://decrypt.co/97795/blackrock-handle-circle-usdc-cash-r...
    - koolba 4y ago
      With treasuries paying 1.6% x $50B, that’s $66M per month of interest.
  - ceejayoz 4y ago
    Tether has attestations, too. They're not audits; Tether got caught moving money in right before an attestation check, and moving it out right after. https://ag.ny.gov/press-release/2021/attorney-general-james-ends-virtual-currency-trading-platform-bitfinexs-illegal https://ag.ny.gov/press-release/2021/attorney-general-james-... > In the face of persistent questions about whether the company actually held sufficient funds, Tether published a self-proclaimed ‘verification’ of its cash reserves, in 2017, that it characterized as “a good faith effort on our behalf to provide an interim analysis of our cash position.” In reality, however, the cash ostensibly backing tethers had only been placed in Tether’s account as of the very morning of the company’s ‘verification.’ > On November 1, 2018, Tether publicized another self-proclaimed ‘verification’ of its cash reserve; this time at Deltec Bank & Trust Ltd. of the Bahamas. The announcement linked to a letter dated November 1, 2018, which stated that tethers were fully backed by cash, at one dollar for every one tether. However, the very next day, on November 2, 2018, Tether began to transfer funds out of its account, ultimately moving hundreds of millions of dollars from Tether’s bank accounts to Bitfinex’s accounts. And so, as of November 2, 2018 — one day after their latest ‘verification’ — tethers were again no longer backed one-to-one by U.S. dollars in a Tether bank account. An attestation tells you what the bank balance is. An audit tells you where it comes from, who has claim on it, etc.

Any stablecoin that is NOT backed 1-1 by fiat, correct? I.e., algorithmic stables. If you're 100% collateralized by USD in your bank account, how can it get de-pegged?

mathgenius 4y ago

With leverage you can long or short more than the available supply of tethers. You are effectively creating fake tether with leverage, and then selling it (or buying it). This stuff also happens with equities, commodities, etc. If there was no leverage, then yes, a 1:1 backed stablecoin would hold it's value. EDIT: I mean the story here is far from clear, you also need to consider arbitrage bots that act between exchanges, etc. etc.

qeternity 4y ago
This isn’t even remotely true. You’re conflating 3 or 4 things with this mistaken understanding.
UncleEntity 4y ago
Even with leverage one would assume that a 1:1 backed asset would survive intact with the people loaning out their coins taking the losses in the case of a run. If they engage in fractional reserve issuance (which it appears they do) then all holders of the coin will be subject to losses if they can’t cash out before the reserves run out. Pretty much guaranteed run by that point.

jandrese 4y ago

Are there any 1-1 fiat stablecoins that aren't just flat out lies? Like every new crypto coin minted requires a matching real dollar to be stashed away. My impression is that nobody does this because it would mean massive waits to buy the crypto coins when the real dollars run low and because the way to make real money is with leverage.

gringoDan 4y ago
USDC is legit: https://www.centre.io/usdc-transparency https://www.centre.io/usdc-transparency
- rapsey 4y ago
  Current market cap is 52 billion. Just where is that money?
  - thebean11 4y ago
    Held by Circle and Coinbase in T bills I believe. edit: more likely held by some holding company controlled by those two companies.
  - scrlk 4y ago
    Apparently with BlackRock and BNY Mellon: https://decrypt.co/97795/blackrock-handle-circle-usdc-cash-reserves-400m-funding-round https://decrypt.co/97795/blackrock-handle-circle-usdc-cash-r...
  - koolba 4y ago
    With treasuries paying 1.6% x $50B, that’s $66M per month of interest.
- ceejayoz 4y ago
  Tether has attestations, too. They're not audits; Tether got caught moving money in right before an attestation check, and moving it out right after. https://ag.ny.gov/press-release/2021/attorney-general-james-ends-virtual-currency-trading-platform-bitfinexs-illegal https://ag.ny.gov/press-release/2021/attorney-general-james-... > In the face of persistent questions about whether the company actually held sufficient funds, Tether published a self-proclaimed ‘verification’ of its cash reserves, in 2017, that it characterized as “a good faith effort on our behalf to provide an interim analysis of our cash position.” In reality, however, the cash ostensibly backing tethers had only been placed in Tether’s account as of the very morning of the company’s ‘verification.’ > On November 1, 2018, Tether publicized another self-proclaimed ‘verification’ of its cash reserve; this time at Deltec Bank & Trust Ltd. of the Bahamas. The announcement linked to a letter dated November 1, 2018, which stated that tethers were fully backed by cash, at one dollar for every one tether. However, the very next day, on November 2, 2018, Tether began to transfer funds out of its account, ultimately moving hundreds of millions of dollars from Tether’s bank accounts to Bitfinex’s accounts. And so, as of November 2, 2018 — one day after their latest ‘verification’ — tethers were again no longer backed one-to-one by U.S. dollars in a Tether bank account. An attestation tells you what the bank balance is. An audit tells you where it comes from, who has claim on it, etc.