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USDC. They see something really bad on their books that's separate from their core business. Just like how Lehman Brothers was a profitable bank that got shred

by boc 4y ago

USDC. They see something really bad on their books that's separate from their core business. Just like how Lehman Brothers was a profitable bank that got shredded by one risky trading strategy. These stablecoins have been devoured one by one, and each time they fall more people start trying to get their money out. USDC will experience a run and it might not be survivable without liquidating user account holdings, which will be a massive extinction event for retail crypto.

cwkoss 4y ago
If Coinbase is operating USDC as full reserve, as they have claimed, is there any risk from it? Seems like there would only be risk if they lied about how they are running it.
- wly_cdgr 4y ago
  Even if that's so, saying it's plausible they lied would be putting it kindly
  - vkou 4y ago
    Unlike the other fly-by-night stablecoin shops, Coinbase's leadership, and their wealth is fully within reach of Uncle Sam's prosecutors. I doubt USDC is undercollateralized. I don't doubt that there are situations where it could depeg, but I don't think anyone ought to be going to jail if it does.
dadoge 4y ago
No one is expecting a run on USDC Given that their business is just a “buy sell” platform, they are trimming around to get just that They have lots of other features like “NFTs, lending” etc and other investments in their UX (separating out to currency vs smart contracts vs defi) I’m sure all that A/B testing to get that will be squeezed now too
wskinner 4y ago
“These stablecoins” lumps together some very different implementations of “thing that is always worth $1”. USDC: fully collateralized by cash or cash equivalents held in US banks - basically a money market fund Terra: partially collateralized by crypto assets + algorithmic magic Tether: like USDC but not held in US banks, and the actual collateral may be partial or of lower quality Dai: overcollaterelized by crypto assets + algorithmic magic These are really distinct things and your risk model for each of them should be different.
- ralph84 4y ago
  > basically a money market fund When money market funds were all about to break the buck in 2008 the Treasury department stepped in with a $50 billion insurance program and the Fed started buying commercial paper to prop them up. Will they do the same for USDC?
  - wskinner 4y ago
    I don't know, and you should include that in your personal risk model. "basically a money market fund" is certainly not intended to suggest a certain level of safety. It is a comment on the structure of the asset.
- overtonwhy 4y ago
  You neglect to mention that Tether's alleged assets have not had a reputable audit published in a long time. And that the people who control it have already demonstrated an ability and willingness to utilize those assets for whatever they please. "The order further finds that Tether and Bitfinex’s combined assets included funds held by third-parties, including at least 29 arrangements that were not documented through any agreement or contract, and that Tether transferred Tether reserve funds to Bitfinex, including when Bitfinex needed help responding to a “liquidity crisis.”" https://www.cftc.gov/PressRoom/PressReleases/8450-21 https://www.cftc.gov/PressRoom/PressReleases/8450-21
dereg 4y ago
Can we start citing our sources for this? I've seen myriad comments on HN lately about stablecoins here citing zero sources and invoking arguments that may have been relevant in 2017, but not in 2022. This is really an injustice to any sort of quality discussion.
ineedasername 4y ago
USDC is, supposedly, fully collateralized by cash & equivalents. If true then the collateral should be well insulated from market conditions and there should be no reason to liquidate account holdings.

by boc 4y ago

cwkoss 4y ago

If Coinbase is operating USDC as full reserve, as they have claimed, is there any risk from it? Seems like there would only be risk if they lied about how they are running it.

wly_cdgr 4y ago
Even if that's so, saying it's plausible they lied would be putting it kindly
- vkou 4y ago
  Unlike the other fly-by-night stablecoin shops, Coinbase's leadership, and their wealth is fully within reach of Uncle Sam's prosecutors. I doubt USDC is undercollateralized. I don't doubt that there are situations where it could depeg, but I don't think anyone ought to be going to jail if it does.

dadoge 4y ago

No one is expecting a run on USDC Given that their business is just a “buy sell” platform, they are trimming around to get just that They have lots of other features like “NFTs, lending” etc and other investments in their UX (separating out to currency vs smart contracts vs defi) I’m sure all that A/B testing to get that will be squeezed now too

wskinner 4y ago

“These stablecoins” lumps together some very different implementations of “thing that is always worth $1”. USDC: fully collateralized by cash or cash equivalents held in US banks - basically a money market fund Terra: partially collateralized by crypto assets + algorithmic magic Tether: like USDC but not held in US banks, and the actual collateral may be partial or of lower quality Dai: overcollaterelized by crypto assets + algorithmic magic These are really distinct things and your risk model for each of them should be different.

ralph84 4y ago
> basically a money market fund When money market funds were all about to break the buck in 2008 the Treasury department stepped in with a $50 billion insurance program and the Fed started buying commercial paper to prop them up. Will they do the same for USDC?
- wskinner 4y ago
  I don't know, and you should include that in your personal risk model. "basically a money market fund" is certainly not intended to suggest a certain level of safety. It is a comment on the structure of the asset.
overtonwhy 4y ago
You neglect to mention that Tether's alleged assets have not had a reputable audit published in a long time. And that the people who control it have already demonstrated an ability and willingness to utilize those assets for whatever they please. "The order further finds that Tether and Bitfinex’s combined assets included funds held by third-parties, including at least 29 arrangements that were not documented through any agreement or contract, and that Tether transferred Tether reserve funds to Bitfinex, including when Bitfinex needed help responding to a “liquidity crisis.”" https://www.cftc.gov/PressRoom/PressReleases/8450-21 https://www.cftc.gov/PressRoom/PressReleases/8450-21

dereg 4y ago

Can we start citing our sources for this? I've seen myriad comments on HN lately about stablecoins here citing zero sources and invoking arguments that may have been relevant in 2017, but not in 2022. This is really an injustice to any sort of quality discussion.

ineedasername 4y ago

USDC is, supposedly, fully collateralized by cash & equivalents. If true then the collateral should be well insulated from market conditions and there should be no reason to liquidate account holdings.