Stablecoin

[Metta]

 

"We are going to keep the US the dominant reserve currency in the world and we will use stablecoin to do that."

Stablecoin is going to be really important so I just want to create a separate thread to focus on stablecoin.

Edited Sunday at 01:10 PM by Metta

[gfp]

I don't know why stable coins are important or needed but that part of the crypto summit stood out to me as well.  A lot of talk about the US Dollar and keeping it at the center of everything.

 

I'm not an expert on Stablecoins obviously - but do holders of, say, Tether USDT forgo the substantial interest they would earn on US dollar cash?  Effectively donating that interest income to the owners of the Tether Limited company?

[TwoCitiesCapital]

2 hours ago, gfp said:

I'm not an expert on Stablecoins obviously - but do holders of, say, Tether USDT forgo the substantial interest they would earn on US dollar cash?  Effectively donating that interest income to the owners of the Tether Limited company?

 

They do - otherwise the stable coin would be regulated as security via the SEC with the expectation of profit and the pass through of interest. 

[SharperDingaan]

The concern is that technology advancements are threatening US reserve currency status, and ability to continue borrowing at low rates. The current slash and burn within the federal service, and the creation of a BTC reserve, suggests that the US is already having difficulty refinancing at favourable rates, and that it is expected to get worse.

 

A stablecoin is just a new coin, over-collaterised against a pile of junk. Or basically a pinata, resting on its ability to maintain a collateral value above the value of the stablecoin issued. Beat on the pinata hard enough ... to break the peg ... and the pillage will be very good  Stablecoin 2.0

 

The monetary equivalent is the gold standard; USD as the stablecoin, bricks of gold as the collateral, at a fixed peg of 'X' USD per ounce of gold. The stablecoin 3.0 version is the BTC standard; 'new' USD debt, exchangeable into BTC at whatever the current market value is. Hold this 'new' debt and you are immune to FX devaluation, so long as the US has sufficient BTC. The actual meaning behind ....  "We are going to keep the US the dominant reserve currency in the world and we will use stablecoin to do that."

 

Hell of a trick! but of course ...... every other country/corporation in the world can also do this same thing as well.

All good for the future value of BTC  

 

SD

       

Edited Sunday at 10:18 PM by SharperDingaan

[Metta]

12 hours ago, gfp said:

I don't know why stable coins are important or needed but that part of the crypto summit stood out to me as well.  A lot of talk about the US Dollar and keeping it at the center of everything.

 

I'm not an expert on Stablecoins obviously - but do holders of, say, Tether USDT forgo the substantial interest they would earn on US dollar cash?  Effectively donating that interest income to the owners of the Tether Limited company?

This image compares the US Treasury hold by China and Stablecoin Issuers. If this trend continues, Stablecoin Issuers will soon hold more US Treasury than China. This is why Scott Bessent badly want to grow the Stablecoin.

[gfp]

So I can earn 4.3% on a genuine US dollar or zero percent on a stable coin with some risk of blow-up and donate my 4.3% interest to a stranger.  What is the real reason $200 billion has moved to US Dollar stablecoins?  Is there a tax avoidance angle for someone here?

 

edit: I guess I can understand why someone in a country without a stable currency or high inflation that does not have the means or permission to access traditional financial markets would use a US dollar pegged stablecoin and forgo the substantial interest they should earn in USD.  So it seems possible that the growth of US dollar pegged stablecoins and their look-though ownership of US treasury bills backing those coins is largely foreign and kind of similar to foreign holdings of US treasury debt in substance.

Edited Monday at 03:36 AM by gfp

[TwoCitiesCapital]

16 minutes ago, gfp said:

So I can earn 4.3% on a genuine US dollar or zero percent on a stable coin with some risk of blow-up and donate my 4.3% interest to a stranger.  What is the real reason $200 billion has moved to US Dollar stablecoins?  Is there a tax avoidance angle for someone here?

 

The real reason is to keep USD on-chain for immediate deployment into other crypto assets without the standard 3-5 business day delay trying to get money to ACH to a crypto broker/dealer to get it back into the eco system. 

 

Additionally, there are some benefits like remittance payments being cheaper, money being sent faster, or individuals in emerging countries with less stable currencies finding ways to access and save in the more stable USD without the need for a banking relationship/permission from their bank/risk of government confiscation/etc. 

 

Plenty of people globally have legit reasons for wanting to hold the USD without needing it to pay them interest. 

Edited Monday at 03:34 AM by TwoCitiesCapital

[gfp]

Thanks, I got part of the way there on my own but I appreciate the more thorough answer.

 

edit: I'll think of it like a checking account I suppose.  no interest but ready to go

Edited Monday at 03:44 AM by gfp

[Metta]

14 minutes ago, TwoCitiesCapital said:

 

The real reason is to keep USD on-chain for immediate deployment into other crypto assets without the standard 3-5 business day delay trying to get money to ACH to a crypto broker/dealer to get it back into the eco system. 

 

Additionally, there are some benefits like remittance payments being cheaper, money being sent faster, or individuals in emerging countries with less stable currencies finding ways to access and save in the more stable USD without the need for a banking relationship/permission from their bank/risk of government confiscation/etc. 

 

Plenty of people globally have legit reasons for wanting to hold the USD without needing it to pay them interest. 

Yes. All valid reasons to hold stablecoin. But people can earn yield from stablecoin onchain as well without Stablecoin Issuers paying the yield. For example the current yield when depositing USDC/USDT on lending platform AAVE is 3.36%. This is low in bear market but in bull market, this yield can be well over 20%. Even today, you can still earn 50% yield on stablecoin if you know where to look and willing to take some risk:

 

 

Edited Monday at 03:49 AM by Metta

[gfp]

33 minutes ago, Metta said:

Yes. All valid reasons to hold stablecoin. But people can earn yield from stablecoin onchain as well without Stablecoin Issuers paying the yield. For example the current yield when depositing USDC/USDT on lending platform AAVE is 3.36%. This is low in bear market but in bull market, this yield can be well over 20%. Even today, you can still earn 50% yield on stablecoin if you know where to look and willing to take some risk:

 

 

 

That sounds shady

[Metta]

1 hour ago, gfp said:

 

That sounds shady

On the contrary, Blockchain can be a very transparent tech for finance if users know how to use it. Otherwise they fall to scams.

[gfp]

6 hours ago, Metta said:

On the contrary, Blockchain can be a very transparent tech for finance if users know how to use it. Otherwise they fall to scams.

 

No, I'm saying 50% yield sounds shady

[Metta]

50 minutes ago, gfp said:

 

No, I'm saying 50% yield sounds shady

It offers 50% yield in limited time(2 weeks) and has hard cap(about $1M). Think of it as a promotion period to bootstrap the biz. So not really shady.

[gfp]

Just now, Metta said:

It offers 50% yield in limited time(2 weeks) and has hard cap(about $1M). Think of it as a promotion period to bootstrap the biz. So not really shady.

 

You must be all over it then.  Big money!  Free money!

[Metta]

48 minutes ago, gfp said:

 

You must be all over it then.  Big money!  Free money!

Need to study the protocols(team, smart contract...) and manage risks here. 

[TwoCitiesCapital]

10 hours ago, gfp said:

 

That sounds shady

 

It is. The yields are fake/inflated (either via promo or bull market speculation), paid in tokens that will typically drop 90% in value and rarely recover, and then the protocols shut down OR payments normalize after you've borne all of the losses. 

 

Aave and Curv are both dApps that I've used in the past - both seem reasonably sound and have existed for a long time without rug pulling anyone. But, they pay low rates as a result. Often lower than money market. And despite being seemingly legit from a protocol perspective, there have still been investors who have lost money via exploits in the mechanisms that control how these decentralized platforms run. 

 

So these have lower counterparty risk, but pay rates below money market for a significantly higher execution risk if you cannot audit the code. I staked both Curv and Aave for ~1-year before giving up and moving to lower risk/higher return opportunities. I suggest most do the same. 

[Metta]

23 minutes ago, TwoCitiesCapital said:

 

It is. The yields are fake/inflated (either via promo or bull market speculation), paid in tokens that will typically drop 90% in value and rarely recover, and then the protocols shut down OR payments normalize after you've borne all of the losses. 

 

Aave and Curv are both dApps that I've used in the past - both seem reasonably sound and have existed for a long time without rug pulling anyone. But, they pay low rates as a result. Often lower than money market. And despite being seemingly legit from a protocol perspective, there have still been investors who have lost money via exploits in the mechanisms that control how these decentralized platforms run. 

 

So these have lower counterparty risk, but pay rates below money market for a significantly higher execution risk if you cannot audit the code. I staked both Curv and Aave for ~1-year before giving up and moving to lower risk/higher return opportunities. I suggest most do the same. 

In this particular case, you hold stablecoin(USDC/USDT) so you don't take principle risk like in your case(staking Curve, AAVE token). Also no locking period, can withdraw principle anytime. The reward(yield) is liquid, can claim and sell every second if you want to.