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> 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 fo

> 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
Even worse is that a lot of these stablecoins have their funds deposited with Silvergate, a niche crypto bank that makes its money by lending to people like Michael Saylor. Their stock is down about 50% over a few months.
dragontamer 4y ago
> 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.. US Treasuries are down like 10% this year. Yes, a bank can liquidate, but at a loss, a 10% loss in this case. The bank would rather hold-onto maturity, which could be 30-days or 90-days for some of the shorter bonds.
- thebean11 4y ago
  Short term US treasuries specifically. They are pretty insensitive to interest rate changes since they are close to maturity.
  - dragontamer 4y ago
    6-month US Treasuries were 0.36% APY on January 19th, 2022. 1-month US Treasuries are 1.13% APY today, June 14th, 2022. ----------- So if you had bought a 6-month US Treasury on Jan 19th, you'd have a 1-month Treasury with .36% APY. That's worth much much less than the current 1-month US Treasuries that are available, so you'd be forced to sell at a loss if customers requested their money back.
    - thebean11 4y ago
      > That's worth much much less than the current 1-month US Treasuries that are available It's not 10% less, or anywhere close to it. You are only missing out on roughly (1/12) * (0.0113 - 0.0036) * (treasury amount) vs a 1 month treasury bought today..I'm having trouble finding a price chart for 1 month treasuries. 6-month is obviously more sensitive to the rate drop than 1 month, but the 10% number you are referencing is almost certainly for long term treasuries, not short term..
      - dragontamer 4y ago
        BND is down 12%, BSV is down 6.5% YTD. BND is not "just" long terms, its a mix of all kinds of bonds. BSV is a mix exclusively of short term (~5 years or less). VBLAX, Vanguard's long-term bond ETF, is down 23% YTD. -------- Given how BND is largely composed of a mix of US Treasuries (of many different maturities), I think the 10% quickie estimate I gave earlier is correct. I'm buying/selling these things in my portfolio, so I've got a good idea of how they're performing.
        FabHK 4y ago
        I'd assume short term is 3 years or less, so make it a 2y duration on average, and assume rates went up by 2%, then we are talking about a 4% loss, not 10%. Still, previously I didn't want to hold USDT anymore; now I don't want to hold USDC anymore either.
        thebean11 4y ago
        Short term for treasuries is generally considered <= 1 year, BSV is only 1 to 5 years. I just looked it up, Circle says they only hold treasures that mature in <= 3 months, so yeah I think even 6.5% is a massive overestimate to how volatile their treasury portfolio is..probably more like <1% which is easy to cover if they just hold a tiny bit of the deposits in cash..
        dragontamer 4y ago
        > Short term for treasuries is generally considered <= 1 year, BSV is only 1 to 5 years. BSV is literally named "Vanguard Short-Term Bond ETF". That being said, the only "standardized" terms I'm aware of are Bills (less than 1 year), bonds (greater than 10 years), and Notes (1 to 10 years). In any case, it is clear that BSV is considered short-term by Vanguard and its investors. So I'm more than willing to believe in Vanguard's language over yours.

wolongong942 4y ago

Even worse is that a lot of these stablecoins have their funds deposited with Silvergate, a niche crypto bank that makes its money by lending to people like Michael Saylor. Their stock is down about 50% over a few months.

dragontamer 4y ago

> 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.. US Treasuries are down like 10% this year. Yes, a bank can liquidate, but at a loss, a 10% loss in this case. The bank would rather hold-onto maturity, which could be 30-days or 90-days for some of the shorter bonds.

thebean11 4y ago
Short term US treasuries specifically. They are pretty insensitive to interest rate changes since they are close to maturity.
- dragontamer 4y ago
  6-month US Treasuries were 0.36% APY on January 19th, 2022. 1-month US Treasuries are 1.13% APY today, June 14th, 2022. ----------- So if you had bought a 6-month US Treasury on Jan 19th, you'd have a 1-month Treasury with .36% APY. That's worth much much less than the current 1-month US Treasuries that are available, so you'd be forced to sell at a loss if customers requested their money back.
  - thebean11 4y ago
    > That's worth much much less than the current 1-month US Treasuries that are available It's not 10% less, or anywhere close to it. You are only missing out on roughly (1/12) * (0.0113 - 0.0036) * (treasury amount) vs a 1 month treasury bought today..I'm having trouble finding a price chart for 1 month treasuries. 6-month is obviously more sensitive to the rate drop than 1 month, but the 10% number you are referencing is almost certainly for long term treasuries, not short term..
    - dragontamer 4y ago
      BND is down 12%, BSV is down 6.5% YTD. BND is not "just" long terms, its a mix of all kinds of bonds. BSV is a mix exclusively of short term (~5 years or less). VBLAX, Vanguard's long-term bond ETF, is down 23% YTD. -------- Given how BND is largely composed of a mix of US Treasuries (of many different maturities), I think the 10% quickie estimate I gave earlier is correct. I'm buying/selling these things in my portfolio, so I've got a good idea of how they're performing.
      - FabHK 4y ago
        I'd assume short term is 3 years or less, so make it a 2y duration on average, and assume rates went up by 2%, then we are talking about a 4% loss, not 10%. Still, previously I didn't want to hold USDT anymore; now I don't want to hold USDC anymore either.
      - thebean11 4y ago
        Short term for treasuries is generally considered <= 1 year, BSV is only 1 to 5 years. I just looked it up, Circle says they only hold treasures that mature in <= 3 months, so yeah I think even 6.5% is a massive overestimate to how volatile their treasury portfolio is..probably more like <1% which is easy to cover if they just hold a tiny bit of the deposits in cash..
        dragontamer 4y ago
        > Short term for treasuries is generally considered <= 1 year, BSV is only 1 to 5 years. BSV is literally named "Vanguard Short-Term Bond ETF". That being said, the only "standardized" terms I'm aware of are Bills (less than 1 year), bonds (greater than 10 years), and Notes (1 to 10 years). In any case, it is clear that BSV is considered short-term by Vanguard and its investors. So I'm more than willing to believe in Vanguard's language over yours.