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What are people holding all those stable coins for? In contrast to other crypto currencies, nobody is holding it for speculation. I doubt anybody expects stabl

by TekMol 4y ago

What are people holding all those stable coins for? In contrast to other crypto currencies, nobody is holding it for speculation. I doubt anybody expects stable coins to be a better store of "dollar value" than the dollar itself. Yet, someone holds those $150B worth of stable coins. Who and why?

agumonkey 4y ago
<coin> -> <stablecoin> is a non taxable event in some countries. You can decide when you get to convert to fiat and pay taxes.
- lottin 4y ago
  Which countries?
  - agumonkey 4y ago
    France AFAIK
alpark3 4y ago
Easier to trade, no issues with tax&bank issues, and a lot of crypto exchanges charge to convert from crypto -> cash, whereas crypto -> crypto(stablecoin) is usually just exchange fees, less than the USD charge.
- TekMol 4y ago
  Ok, I understand that a stablecoin it is easier to handle than the dollar. But who is doing it? What is the use case?
  - pvarangot 4y ago
    Trading. Quick arbitrage, day trading, pump and dumps, leverage. The same thing you can do by having dollars on your stock trading account you usually need coins on your crypto account and it would be crazy to have the volatile ones.
    - TekMol 4y ago
      So crypto traders hold $150B of dollar denominated stable coins at the moment?
      - tornato7 4y ago
        With the crypto market cap at $1300B that sounds pretty reasonable to have 11-12% cash on hand
        FireBeyond 4y ago
        If only Tether and similar could show something, anything, an audit, that shows anything close to this. I almost typed audit-like. But I remembered they've pulled that shit before. "Attestations of balances" mean fuck-all when even back when they were denying the links between Bitfinex and Tether, the same people were countersigning loans between the two for both parties. Oh, they did claim that they had had an audit done. But they couldn't release it to the public "because it was in Mandarin". I very very very much doubt that 11-12% cash is in anyone's hand.
        xur17 4y ago
        > If only Tether and similar could show something, anything, an audit, that shows anything close to this. Tether isn't the only stablecoin. USDC, GUSD, DAI, LUSD, etc all have either attestations / audit reports (that are actually legitimate) or are overcollateralized with assets that can be seen on chain.
      - nostrademons 4y ago
        Not that unreasonable. The total number of crypto traders globally is estimated at between 300M [1][2] (note: close to the population of the U.S.) $150B is an average of $500/user held as stablecoins, which doesn't seem that far off. [1] https://triple-a.io/crypto-ownership/ https://triple-a.io/crypto-ownership/ [2] https://fortunly.com/statistics/cryptocurrency-statistics/#gref https://fortunly.com/statistics/cryptocurrency-statistics/#g...
  - quickthrower2 4y ago
    Traders and tax evaders. With stablecoins you can trade on decentralised smart contracts, and they even allow something called flash loans where you borrow the stablecoin, trade it for profit and then pay it back in one rollbackable transaction! Also there are many high yield investment schemes based on holding stablecoins.
- jen729w 4y ago
  > no issues with tax&bank issues Sure about that bit? This may be the perception – that holding your assets in 'the crypto system' avoids tax issues – but the taxman will disagree. Swapping $BTC for $USDC or whatever your tether of choice is is a 'taxable event'. You've sold one security in exchange for another. It doesn't matter that they're both crypto. Now, it might be harder for the taxman to detect this event, which is a different thing.
  - krzyk 4y ago
    You mean taxable for US tax office? In my country it is not taxable, only exchange to fiat currency is. (and this is explicitly mentioned).
    - lottin 4y ago
      If this is true, it simply means your tax code has a giant loophole that allows people avoid paying tax on capital gains by simply swapping an asset for another.
      - adnzzzzZ 4y ago
        You still have to pay taxes when you convert back to fiat though. And eventually you have to do this because you don't want a significant portion of your wealth in stablecoins that might collapse overnight.
      - sokoloff 4y ago
        Sort of like a 1031 exchange in the US: https://en.m.wikipedia.org/wiki/Internal_Revenue_Code_section_1031 https://en.m.wikipedia.org/wiki/Internal_Revenue_Code_sectio...
      - krzyk 4y ago
        Why? You eventually have to pay it when you cash out (or buy service, goods with crypto). If you wait you loose tax returns for the amount you invested in crypto (with each year you have it halved). Basically this is the same as in case of stock market. You don't pay taxes until you sell stock. And here stock is whole crypto market.
ur-whale 4y ago
> Who and why? IIUC: a) exchanges for short-term liquidity b) traders for whom going in and out of actual USD is a giant PITN Or to put it differently: when you want to trade on e.g. Binance, it's a lot easier to trade in and out of Binance's stablecoin than in an out of actual USD.
- TekMol 4y ago
  I associate the term "short-term liquidity" with money that can be used to pay employees and suppliers. Are exchanges really holding stablecoins for this purpose?
  - tirpen 4y ago
    No, Crypto isn't used by people who have "employees and suppliers", those people use currencies instead. The crypto community just like to co-opt all sorts of terms from economy to give themselves a veneer of faux credibility.
nly 4y ago
Provided you trust the stablecoin, it's a lot safer to keep e.g. USDC in a wallet you control rather than hold USD fiat balance on an exchange or some other shady crypto service.
- lottin 4y ago
  Why is it safer? Isn't USDC issued by some entity, which promises to convert USDC back into USD?
  - Jommi 4y ago
    Multiple parties need to fail for USDC to not be tradeable or redeemable to USD - holding in an exchange just requires one party to fail (exchange hacked, exit scam etc.) It's pretty simple risk logic.
    - lottin 4y ago
      If the issuer of USDC fails to redeem USDC with USD, the price of USDC in the market will collapse, so I'm not sure which "multiple parties" have to fail for USDC not to be redeemable. Further, keeping funds in a non-custodial wallet entails a huge operational risk that you're glossing over entirely.
      - Jommi 4y ago
        Going to Circle to redeem your USDC for FIAT USD is not the only way of receiving FIAT USD from USDC. You can also sell it for another asset, and sell that for FIAT. Or sell it for FIAT on an exchange. The OP was about the safety of "holding" fiat on a single exchange vs USDC on your wallet. Your point about non-custodial wallet risk is a misonemer as this is purely about can you trust yourself more than trust an exchange.
        lottin 4y ago
        I don't think you understand how a currency peg works. If USDC loses the peg, arbitrageurs will buy USDC and redeem them, pocketing the difference. This will create a buying pressure that will re-establish the peg. Therefore maintaining the peg depends crucially on the issuer's ability to redeem USDC. If the issuer fails to redeem USDC, it's game over. The point that I made about the risks associated with using non-custodial wallets is also very valid.
skybrian 4y ago
I don’t understand how this works, but according to [1] it’s used as collateral for loans. This seems to be a form of betting on price changes? See [2]. [1] https://bam.kalzumeus.com/archive/stablecoin-mechanisms-and-use-cases/ https://bam.kalzumeus.com/archive/stablecoin-mechanisms-and-... [2] https://en.wikipedia.org/wiki/Perpetual_futures https://en.wikipedia.org/wiki/Perpetual_futures
cdiddy2 4y ago
Its a much nicer experience for moving around large sums of money. I have heard of a fair few people who use it primarily for funding angellist investments since its more hassle free than a wire.
- deleted 4y ago
  [deleted]
hestefisk 4y ago
Because they provide nice yield. I can stake USDT on most exchanges and get 5-7% APY. I doubt those yields will hold for much longer though.
- TekMol 4y ago
  Which exchange pays you those 5-7% and why do they do that?
  - whimsicalism 4y ago
    I don't know about 5-7% but you can get paid by uniswap for providing liquidity to speculators.
  - xmcqdpt2 4y ago
    There is even better rates available. The Anchor protocol pays 20% APR! And the principal is protected as described in the white paper, > Anchor offers a principal-protected stablecoin savings product that pays depositors a stable interest rate. It achieves this by stabilizing the deposit interest rate with block rewards accruing to assets that are used to borrow stablecoins. source: https://www.anchorprotocol.com/docs/anchor-v1.1.pdf https://www.anchorprotocol.com/docs/anchor-v1.1.pdf You literally cannot lose! And the gains are in a stablecoin (UST) so you don't even have to deal with the volitality of crypto https://www.coindesk.com/price/terrausd/ https://www.coindesk.com/price/terrausd/ Tradfi doesn't offer these kind of risk-free rates because they are greedy vampires, unlike your friendly smart defi devs.
    - civilized 4y ago
      > You literally cannot lose! And the gains are in a stablecoin (UST) so you don't even have to deal with the volitality of crypto ...who wants to tell him? https://fortune.com/2022/05/19/luna-terrausd-ust-algorithmic-stablecoins-doomed/ https://fortune.com/2022/05/19/luna-terrausd-ust-algorithmic...
    - thallium205 4y ago
      Uhmmmm lmao have you not seen the algorithmic stable coins getting smoked recently?
hihihihi1234 4y ago
Speculation, tax avoidance and money laundering, mainly.
cypress66 4y ago
It doesn't mean you are holding. If you want to transfer money using crypto (which is it's original purpose) and you don't want to be affected by crypto volatility, then stable coins are perfect. Perfect for P2P on and off ramps too. Also some countries such as Argentina have literally stolen the money of their citizens bank accounts in the past. So stable coins are more trustworthy than the banking system. https://en.m.wikipedia.org/wiki/Corral%C3%B3n https://en.m.wikipedia.org/wiki/Corral%C3%B3n
jsemrau 4y ago
I was mining BTC when it was 68K. Should have transferred it over to a stable-coin right there and then. Now I still hold the same amount in BTC but its worth a lot less.
shawabawa3 4y ago
As someone that holds a lot of stable coins (USDC, not USDT) The same reason you would hold dollars in a bank account. My local currency (GBP) is weak atm and falling against the dollar. I want to be able to use crypto services (easy transfers, buying/selling crypto, borrow/lend on DeFI), but I don't want any more exposure to the currently volatile crypto markets, so I hold a lot of USDC Some of that USDC is being lent making ~2%, better than most banks. I can transfer it to someone else ~instantly and very cheap, instead of waiting 3-5 days for a bank transfer (I recently put some money in a crypto investment fund, transferred my investment in USDC)
- PKop 4y ago
  It's surprising how many times the question you are answering gets asked and people still don't get it.
  - birracerveza 4y ago
    Yeah but crypto is bad, so why would I buy crypto? There's no reasoning to be had here.
  - labrador 4y ago
    > My local currency (GBP) is weak atm and falling against the dollar That's an edge case that isn't a concern for Americans who are most enthusiastic about crypto and most involved in the crypto revolution. This is pointed out often and the crypto enthusiasts don't get it. Crypto for most of us is YAGNI YAGNI! Because you ain't gonna need it https://www.youtube.com/watch?v=fPJohxVLJu0 https://www.youtube.com/watch?v=fPJohxVLJu0
    - louloulou 4y ago
      Maybe individuals are in a better position to judge whether or not they need something in their own lives. And if they use something, it's usually a pretty good indication that it is useful to them.
samatman 4y ago
They combine one strength of sovereign currencies (stable unit of account and store of value) with some strengths of cryptocurrencies, chiefly self-custody. If someone is invested in e.g. Bitcoin and thinks they can sell the peak, turning it into $stablecoin is the easiest way, and the only compelling reason to then move that value into sovereign currencies is: you want to spend it, or there's reason to hedge on the stability of the peg. If you're planning to re-enter the market later, (actually stable) stablecoins are just as good, and are what a lot of these traders will have when they sell, so why do two additional transactions, even if they don't trigger taxable events, which they would. I don't own stablecoins.

by TekMol 4y ago

agumonkey 4y ago

<coin> -> <stablecoin> is a non taxable event in some countries. You can decide when you get to convert to fiat and pay taxes.

lottin 4y ago
Which countries?
- agumonkey 4y ago
  France AFAIK

alpark3 4y ago

Easier to trade, no issues with tax&bank issues, and a lot of crypto exchanges charge to convert from crypto -> cash, whereas crypto -> crypto(stablecoin) is usually just exchange fees, less than the USD charge.

TekMol 4y ago
Ok, I understand that a stablecoin it is easier to handle than the dollar. But who is doing it? What is the use case?
- pvarangot 4y ago
  Trading. Quick arbitrage, day trading, pump and dumps, leverage. The same thing you can do by having dollars on your stock trading account you usually need coins on your crypto account and it would be crazy to have the volatile ones.
  - TekMol 4y ago
    So crypto traders hold $150B of dollar denominated stable coins at the moment?
    - tornato7 4y ago
      With the crypto market cap at $1300B that sounds pretty reasonable to have 11-12% cash on hand
      - FireBeyond 4y ago
        If only Tether and similar could show something, anything, an audit, that shows anything close to this. I almost typed audit-like. But I remembered they've pulled that shit before. "Attestations of balances" mean fuck-all when even back when they were denying the links between Bitfinex and Tether, the same people were countersigning loans between the two for both parties. Oh, they did claim that they had had an audit done. But they couldn't release it to the public "because it was in Mandarin". I very very very much doubt that 11-12% cash is in anyone's hand.
        xur17 4y ago
        > If only Tether and similar could show something, anything, an audit, that shows anything close to this. Tether isn't the only stablecoin. USDC, GUSD, DAI, LUSD, etc all have either attestations / audit reports (that are actually legitimate) or are overcollateralized with assets that can be seen on chain.
    - nostrademons 4y ago
      Not that unreasonable. The total number of crypto traders globally is estimated at between 300M [1][2] (note: close to the population of the U.S.) $150B is an average of $500/user held as stablecoins, which doesn't seem that far off. [1] https://triple-a.io/crypto-ownership/ https://triple-a.io/crypto-ownership/ [2] https://fortunly.com/statistics/cryptocurrency-statistics/#gref https://fortunly.com/statistics/cryptocurrency-statistics/#g...
- quickthrower2 4y ago
  Traders and tax evaders. With stablecoins you can trade on decentralised smart contracts, and they even allow something called flash loans where you borrow the stablecoin, trade it for profit and then pay it back in one rollbackable transaction! Also there are many high yield investment schemes based on holding stablecoins.
jen729w 4y ago
> no issues with tax&bank issues Sure about that bit? This may be the perception – that holding your assets in 'the crypto system' avoids tax issues – but the taxman will disagree. Swapping $BTC for $USDC or whatever your tether of choice is is a 'taxable event'. You've sold one security in exchange for another. It doesn't matter that they're both crypto. Now, it might be harder for the taxman to detect this event, which is a different thing.
- krzyk 4y ago
  You mean taxable for US tax office? In my country it is not taxable, only exchange to fiat currency is. (and this is explicitly mentioned).
  - lottin 4y ago
    If this is true, it simply means your tax code has a giant loophole that allows people avoid paying tax on capital gains by simply swapping an asset for another.
    - adnzzzzZ 4y ago
      You still have to pay taxes when you convert back to fiat though. And eventually you have to do this because you don't want a significant portion of your wealth in stablecoins that might collapse overnight.
    - sokoloff 4y ago
      Sort of like a 1031 exchange in the US: https://en.m.wikipedia.org/wiki/Internal_Revenue_Code_section_1031 https://en.m.wikipedia.org/wiki/Internal_Revenue_Code_sectio...
    - krzyk 4y ago
      Why? You eventually have to pay it when you cash out (or buy service, goods with crypto). If you wait you loose tax returns for the amount you invested in crypto (with each year you have it halved). Basically this is the same as in case of stock market. You don't pay taxes until you sell stock. And here stock is whole crypto market.

ur-whale 4y ago

> Who and why? IIUC: a) exchanges for short-term liquidity b) traders for whom going in and out of actual USD is a giant PITN Or to put it differently: when you want to trade on e.g. Binance, it's a lot easier to trade in and out of Binance's stablecoin than in an out of actual USD.

TekMol 4y ago
I associate the term "short-term liquidity" with money that can be used to pay employees and suppliers. Are exchanges really holding stablecoins for this purpose?
- tirpen 4y ago
  No, Crypto isn't used by people who have "employees and suppliers", those people use currencies instead. The crypto community just like to co-opt all sorts of terms from economy to give themselves a veneer of faux credibility.

nly 4y ago

Provided you trust the stablecoin, it's a lot safer to keep e.g. USDC in a wallet you control rather than hold USD fiat balance on an exchange or some other shady crypto service.

lottin 4y ago
Why is it safer? Isn't USDC issued by some entity, which promises to convert USDC back into USD?
- Jommi 4y ago
  Multiple parties need to fail for USDC to not be tradeable or redeemable to USD - holding in an exchange just requires one party to fail (exchange hacked, exit scam etc.) It's pretty simple risk logic.
  - lottin 4y ago
    If the issuer of USDC fails to redeem USDC with USD, the price of USDC in the market will collapse, so I'm not sure which "multiple parties" have to fail for USDC not to be redeemable. Further, keeping funds in a non-custodial wallet entails a huge operational risk that you're glossing over entirely.
    - Jommi 4y ago
      Going to Circle to redeem your USDC for FIAT USD is not the only way of receiving FIAT USD from USDC. You can also sell it for another asset, and sell that for FIAT. Or sell it for FIAT on an exchange. The OP was about the safety of "holding" fiat on a single exchange vs USDC on your wallet. Your point about non-custodial wallet risk is a misonemer as this is purely about can you trust yourself more than trust an exchange.
      - lottin 4y ago
        I don't think you understand how a currency peg works. If USDC loses the peg, arbitrageurs will buy USDC and redeem them, pocketing the difference. This will create a buying pressure that will re-establish the peg. Therefore maintaining the peg depends crucially on the issuer's ability to redeem USDC. If the issuer fails to redeem USDC, it's game over. The point that I made about the risks associated with using non-custodial wallets is also very valid.

skybrian 4y ago

I don’t understand how this works, but according to [1] it’s used as collateral for loans. This seems to be a form of betting on price changes? See [2]. [1] https://bam.kalzumeus.com/archive/stablecoin-mechanisms-and-use-cases/ https://bam.kalzumeus.com/archive/stablecoin-mechanisms-and-... [2] https://en.wikipedia.org/wiki/Perpetual_futures https://en.wikipedia.org/wiki/Perpetual_futures

cdiddy2 4y ago

Its a much nicer experience for moving around large sums of money. I have heard of a fair few people who use it primarily for funding angellist investments since its more hassle free than a wire.

deleted 4y ago
[deleted]

hestefisk 4y ago

Because they provide nice yield. I can stake USDT on most exchanges and get 5-7% APY. I doubt those yields will hold for much longer though.

TekMol 4y ago
Which exchange pays you those 5-7% and why do they do that?
- whimsicalism 4y ago
  I don't know about 5-7% but you can get paid by uniswap for providing liquidity to speculators.
- xmcqdpt2 4y ago
  There is even better rates available. The Anchor protocol pays 20% APR! And the principal is protected as described in the white paper, > Anchor offers a principal-protected stablecoin savings product that pays depositors a stable interest rate. It achieves this by stabilizing the deposit interest rate with block rewards accruing to assets that are used to borrow stablecoins. source: https://www.anchorprotocol.com/docs/anchor-v1.1.pdf https://www.anchorprotocol.com/docs/anchor-v1.1.pdf You literally cannot lose! And the gains are in a stablecoin (UST) so you don't even have to deal with the volitality of crypto https://www.coindesk.com/price/terrausd/ https://www.coindesk.com/price/terrausd/ Tradfi doesn't offer these kind of risk-free rates because they are greedy vampires, unlike your friendly smart defi devs.
  - civilized 4y ago
    > You literally cannot lose! And the gains are in a stablecoin (UST) so you don't even have to deal with the volitality of crypto ...who wants to tell him? https://fortune.com/2022/05/19/luna-terrausd-ust-algorithmic-stablecoins-doomed/ https://fortune.com/2022/05/19/luna-terrausd-ust-algorithmic...
  - thallium205 4y ago
    Uhmmmm lmao have you not seen the algorithmic stable coins getting smoked recently?

hihihihi1234 4y ago

Speculation, tax avoidance and money laundering, mainly.

cypress66 4y ago

It doesn't mean you are holding. If you want to transfer money using crypto (which is it's original purpose) and you don't want to be affected by crypto volatility, then stable coins are perfect. Perfect for P2P on and off ramps too. Also some countries such as Argentina have literally stolen the money of their citizens bank accounts in the past. So stable coins are more trustworthy than the banking system. https://en.m.wikipedia.org/wiki/Corral%C3%B3n https://en.m.wikipedia.org/wiki/Corral%C3%B3n

jsemrau 4y ago

I was mining BTC when it was 68K. Should have transferred it over to a stable-coin right there and then. Now I still hold the same amount in BTC but its worth a lot less.

shawabawa3 4y ago

As someone that holds a lot of stable coins (USDC, not USDT) The same reason you would hold dollars in a bank account. My local currency (GBP) is weak atm and falling against the dollar. I want to be able to use crypto services (easy transfers, buying/selling crypto, borrow/lend on DeFI), but I don't want any more exposure to the currently volatile crypto markets, so I hold a lot of USDC Some of that USDC is being lent making ~2%, better than most banks. I can transfer it to someone else ~instantly and very cheap, instead of waiting 3-5 days for a bank transfer (I recently put some money in a crypto investment fund, transferred my investment in USDC)

PKop 4y ago
It's surprising how many times the question you are answering gets asked and people still don't get it.
- birracerveza 4y ago
  Yeah but crypto is bad, so why would I buy crypto? There's no reasoning to be had here.
- labrador 4y ago
  > My local currency (GBP) is weak atm and falling against the dollar That's an edge case that isn't a concern for Americans who are most enthusiastic about crypto and most involved in the crypto revolution. This is pointed out often and the crypto enthusiasts don't get it. Crypto for most of us is YAGNI YAGNI! Because you ain't gonna need it https://www.youtube.com/watch?v=fPJohxVLJu0 https://www.youtube.com/watch?v=fPJohxVLJu0
  - louloulou 4y ago
    Maybe individuals are in a better position to judge whether or not they need something in their own lives. And if they use something, it's usually a pretty good indication that it is useful to them.

samatman 4y ago

They combine one strength of sovereign currencies (stable unit of account and store of value) with some strengths of cryptocurrencies, chiefly self-custody. If someone is invested in e.g. Bitcoin and thinks they can sell the peak, turning it into $stablecoin is the easiest way, and the only compelling reason to then move that value into sovereign currencies is: you want to spend it, or there's reason to hedge on the stability of the peg. If you're planning to re-enter the market later, (actually stable) stablecoins are just as good, and are what a lot of these traders will have when they sell, so why do two additional transactions, even if they don't trigger taxable events, which they would. I don't own stablecoins.