10 ms·
The State of Stablecoin Risks
- bratwurst3000 4y agoHow is crypto still a thing?
- api 4y agoA prolonged environment of virtually zero to even negative interest rates inflating speculative bubbles all over the place.
- SV_BubbleTime 4y agoI think it’s easier than that. Two things that go hand in hand. There is still money coming in, and people want to believe. When one of those stops… look out.
- mckirk 4y agoWhen I randomly checked my Steam account and realized I had about $70 worth of ingame items that I had gotten through drops while playing, and which had suddenly 'appreciated in value' noticeably... That's when I knew we are in an everything-bubble.
- bratwurst3000 4y agoI like „everythingbubble“ that explains so much so easy :)
- brink 4y agoIt's gambling with charts, and greed is an inherent vice in humans.
- abirch 4y agoCompanies like Fidelity are letting people gamble their 401ks in crypto. A16Z just set aside billions for the Web3. It's going to take a while to disappear.
- koolba 4y agoCrypto trading in a 401k would at least solve the maze of taxes and valuations. Assuming it doesn’t go to zero (yes, yes, big if…), what you get out when you cash out and withdraw would be ordinary income.
- cycrutchfield 4y agoNot to mention widespread adoption would increase the likelihood of a government bailout when it inevitably crashes, which is the real motivating factor for those pushing for it
- NotSammyHagar 4y agoThat doesn't necessarily follow to me. When an average company goes bankrupt, people just lose their money. I believe federal intervention is when there is systemic risk (or major criminal actions). I've been learning from this thread but it doesn't seem to be systemic. It's not going to take down a bunch of real world banks, crypto market cap was less than $1T. If I own bank stock or whatever in my 401k, it's on me if it dies, crypto would be the same.
- splitrocket 4y agoYou take the stairs up, but the elevator down.
- bratwurst3000 4y agoSome maybe the roof …
- jjoonathan 4y agoWhat? Fidelity won't even let me buy stocks in my 401k, let alone options or crypto -- they only offer a couple of curated high-fee ETFs.
- tablespoon 4y ago
- fullshark 4y agoBecause "it's the best performing asset this decade and the future of finance" and FOMO.
- EGreg 4y agoCrypto used to mean cryptography. It is very much a thing. https://amp.theguardian.com/technology/2021/nov/18/crypto-cryptocurrency-cryptographers https://amp.theguardian.com/technology/2021/nov/18/crypto-cr... On the other hand, Bitcoin and Web3 sucks mainly because it is based on Blockchain. That solves the double-spend problem but in the most brute force way: gather all transactions in one place (miner) and look for a double-spend, then have everyone store the state of every coin/smart contract. That is as dumb as having BitTorrent require every seeder to host every file. As more people join, the throughput always remains the same. Can you name any other Internet protocols where “max transactions per second” is a thing? How many websites per second can HTTP support? How many emails per second can SMTP support? Blockchain is one of the only technologies in history that promises to become slower and more expensive over time. And hence people jump in early, to buy the “utility token” issued in block rewards, because it’ll become more scarce later as transaction costs skyrocket. All it does is attract speculation, not utility. And hence, rather than using crypto with smart contracts to power community applications such as https://intercoin.org/applications https://intercoin.org/applications — instead it is relegated to peer-to-peer applications that do transactions once in a while. This is what must happen to make crypto mainstream: https://intercoin.org/proposal.pdf https://intercoin.org/proposal.pdf … but most projects are stuck in just doing more of the same … blockchain, blockchain, speculation, speculation, yields, rewards out of thin air, etc. If no one successfully does this then we’ll live in a world where Big Tech controls our interactions and the Federal Governments (CBDC) controls our transactions. Very centrally planned world with no viable crypto alternatives. China already has WeChat central database and the social credit system. Canada already froze accounts of truckers. It’s early days.
- cmrdporcupine 4y ago"Freezing accounts of truckers" is not what happened.
- djbebs 4y agoIt literally is though
- 4y ago
- time_to_smile 4y agoCheap money means there is no reality. This doesn't just impact crypto, but all of startup land and most of tech. How many startups have you interviewed with that were planning for "doubling head count this year!"? Nearly everyone I've talked to since 2018 has been planning for exponential growth with no idea what to even do with all these new hires. People are building and shipping products that fundamentally don't make economic sense. There have been plenty of IPOs for companies it's not entirely clear can ever turn a profit. There was a post on Hacker News a few weeks back claiming that "natural resources" don't exist and there are absolutely no limits to economic growth. I'm not fan of crypto but it's the natural consequence of the reality fading from memory. As the price of money goes up, reality will return with a vengeance.
- ch4s3 4y ago> There was a post on Hacker News a few weeks back claiming that "natural resources" don't exist and there are absolutely no limits to economic growth. I don't disagree per se, but a resource is really a material that human ingenuity has been applied to so that it can serve a useful purpose. There are lots of lots of materials that used to be turned into resources that we no longer bother with like whale oil, or current resources that used to just be gunk like crude oil. There are also resources which don't come from nature directly like computation, money, and so on. There is a lot of potential to find new uses for materials and resources in the future that could lead to further economic growth. Growth can be defined as as the increase or improvement in the inflation-adjusted market value of goods and services produced over a period of time. Services don't necessarily require pulling things out of the ground. Improvements in computing that increase productivity lead to growth. Making a person to person service more efficient or inventing a new service could allow for a lot of future growth. Is this likely to be infinitely sustainable? I have no idea.
- bratwurst3000 4y agoI meant that ironic. If one tries to answer the question the reality of crypto will begin to emerge :)
- NelsonMinar 4y agoNew thing in here (to me): USDC is largely banked by Signature Bank of NY and that "USDC largely banks with SBNY, and a large fraction of SBNY’s liabilities are specifically to USDC". Which is a form of systemic risk; can the bank make good on its obligations? This seems like something a banking regulator ought to be examining closely.
- woeirua 4y agoI think the entire point of mentioning SBNY is that they are acting like a traditional bank in lending out their deposits. The question is what kind of loans did they make, and how liquid are they? If they're not very liquid then USDC will eventually have a liquidity crisis.
- ceejayoz 4y agoI think the question being raised is "what if SBNY collapses"?
- NelsonMinar 4y agoOr more specifically "what if a run on USDC causes Standard Bank of New York to collapse?" The bank is part of the legitimate, regulated economy. The regulators should be insulating the real economy from cryptocurrency scams and gambling.
- woah 4y agoIf people wanted to get their money out and SBNY had somehow misplaced it, it would seem like the “scam” was the “legitimate, regulated” SBNY, not “cryptocurrency”
- FabHK 4y agoIn the good old regulated economy, individual depositors of a bank are protected by the FDIC (up to a certain level), and have no reason to engage in a bank run. Now, if all those individual depositors instead give their money to some unregulated entity (USDC), and that unregulated entity gives $50 bn to a bank, and then one day turns around and says to the bank "hey, I'd like my $50 bn back", then the bank might not have that much at hand right now. And since the unregulated entity is not covered by the FDIC, individual investors might have an incentive to engage in a bank run.
- thedudeabides5 4y agoCrypto can be cool, or crypto can be money, it cannot be both.
- woeirua 4y agoYep, when the run on the so-called stablecoins happens it will take down the exchanges more-or-less all at once (since they all have large holdings of USDC and USDT and use USDC/USDT to swap between one another). The exchanges will freeze withdrawals as they'll have huge holes in their balance sheets and the entire system will implode in spectacular fashion. If you have any money left in crypto at this point, then you get what you deserve.
- thebean11 4y agoUSDC claims to have the entirety of it in short term US treasuries. I don't know enough about banking to understanding whether the evidence in the article conflicts with that though. > If you have any money left in crypto at this point, then you get what you deserve. Yeah, I heard this in 2017 too. In reality neither of us knows how things will look a year from now. Short term will probably be ugly though.
- dragontamer 4y agoShort term treasuries still take time to change into US Dollars. A bank run could make USDC insolvent in the short term, in theory. That's why you have FDIC insurance to cover the time period between say, a 30 day treasury and the worst case bank run. That being said, such an event hasn't really happened in decades. So it's relatively low chance of happening.
- thebean11 4y ago> That's why you have FDIC insurance to cover the time period between say, a 30 day treasury and the worst case bank run. Well, usually banks use your money for much riskier loans (business loans, personal loans, mortgages) which is why you need FDIC. Not because treasuries take too long to sell. The volume on US treasuries is like half a trillion a day, so it shouldn't take very long to liquidate even large amounts of USDC's holdings..
- wolongong942 4y ago
- johnnyApplePRNG 4y agoApproximately half a billion USD are traded for USDT every single week though... and have been for a number of years now: https://cryptowat.ch/charts/KRAKEN:USDT-USD?period=1w_Monday https://cryptowat.ch/charts/KRAKEN:USDT-USD?period=1w_Monday If there was a discrepancy between the amount of USDT and USD controlled by Tether, surely that peg would be far away from $1 USD/$1 USDT right now no? It has slipped during periods of mass hysteria in the crypto markets a few times in the last few years but has always reverted to $1 within a few days tops.
- gizmo686 4y ago> If there was a discrepancy between the amount of USDT and USD controlled by Tether, surely that peg would be far away from $1 USD/$1 USDT right now no? Why would you think that? As long as Teather has >0 USD they can honor redemptions at face value. When Teather has 0 USD, their ability to redeem also drops to 0, and the peg collapses.
- mirntyfirty 4y agoI’d replace mass hysteria with moments of clarity. Interest rates rising will motivate investors to purchase more bonds and limit the speculative tendencies that propped up the crypto marketplace.
- X6S1x6Okd1st 4y agoIf you feel confidant that Tether will collapse this year then prove it & start building an impressive brier score: https://www.metaculus.com/questions/9121/tether-collapses-in-2022/ https://www.metaculus.com/questions/9121/tether-collapses-in...
- ogogmad 4y agosigh What is Tether for again, and why is its market cap ridiculously high? What's wrong with actual USD? I would make a bet on Metaculus if I just understood why people use this thing. Is it only for DeFi / Ethereum-type smart contracts now? Those interest-earning things that earn 20% a year? For porn stars who keep USDT and have to periodically redeem them for USD because banks refuse to do business with them?
- lupire 4y agoUSD is not on the blockchain. You can't use it for peer to peer trading. USD is regulated. You can't use it for instant free market reading at a broker. USDT, despite its potential unsoundness, is one of the rare cryptocurrencies that is actually a currency
- ogogmad 4y ago> USD is not on the blockchain. You can't use it for peer to peer trading. You can do a bank transfer. > USD is regulated. You can't use it for instant free market reading at a broker. I don't know what this means, or what this implies.