Crypto currency (IF banned from CA)

[LinekersLegs]

 

[jayonenote]

How do they maintain their peg?

Commodity-backed​

The main characteristics of backed stablecoins are:

• Their value is fixed to one or more commodities and redeemable for such (more or less) on demand,
• There is a promise to pay, by unregulated individuals, agorist firms, or even regulated financial institutions,
• The amount of commodity used to back the stablecoin has to reflect the circulating supply of the stablecoin.

 

[mill]

Commodity-backed​

The main characteristics of backed stablecoins are:

• Their value is fixed to one or more commodities and redeemable for such (more or less) on demand,
• There is a promise to pay, by unregulated individuals, agorist firms, or even regulated financial institutions,
• The amount of commodity used to back the stablecoin has to reflect the circulating supply of the stablecoin.

Yes. And that ‘commodity’ is the USD. So for all intents and purposes you are getting an asset that is impacted by exactly the same factors as fiat (relative growth, interest rate differentials, valuations, trade and capital flows).

Yes, you are getting 7% but the differential is essentially credit risk - the crypto isn’t backed by a guarantor in the same way as the USD is.

That 7% will also look less attractive as rates start to rise so will need to increase when that happens. Which will reduce the existing value of the coin on a relative basis (or the peg will need to be broken).

It’s not easy to peg a currency when there is a shift in monetary conditions. We are at the top of a cycle for that at the moment.

 

[LinekersLegs]

There are very Stable Coins tagged to the Dollar. At the moment you can get over 7% interest on such Coins. Very stable whilst you get less than 1% on your £ in your Bank Account.
At present I'm getting anything from 77% to over 11% on some of my investments (Compound interest too)

Isn’t Tether the most popular dollar stablecoin? Despite some very questionable practices and dubious reserves if anyone tried to redeem it for actual dollars?

Tether (cryptocurrency) - Wikipedia

en.wikipedia.org

Tether Limited formerly falsely[4] claimed that each token was backed by one United States dollar, but on 14 March 2019 changed the backing to include loans to affiliate companies.[5][6] The Bitfinex exchange was the subject of a lawsuit by the New York Attorney General of using Tether's funds to cover up $850 million in funds missing since mid-2018.[7][8] The investigation found that iFinex — the operator of Bitfinex and Tether — made false statements about the backing of the Tether and about the movement of hundreds of millions of dollars between the two companies to cover up the truth about massive losses by Bitfinex. According to the New York Attorney General, "Tether’s claims that its virtual currency was fully backed by U.S. dollars at all times was a lie".[4]

 

[jayonenote]

Isn’t Tether the most popular dollar stablecoin? Despite some very questionable practices and dubious reserves if anyone tried to redeem it for actual dollars?

Tether (cryptocurrency) - Wikipedia

en.wikipedia.org

Tether Limited formerly falsely[4] claimed that each token was backed by one United States dollar, but on 14 March 2019 changed the backing to include loans to affiliate companies.[5][6] The Bitfinex exchange was the subject of a lawsuit by the New York Attorney General of using Tether's funds to cover up $850 million in funds missing since mid-2018.[7][8] The investigation found that iFinex — the operator of Bitfinex and Tether — made false statements about the backing of the Tether and about the movement of hundreds of millions of dollars between the two companies to cover up the truth about massive losses by Bitfinex. According to the New York Attorney General, "Tether’s claims that its virtual currency was fully backed by U.S. dollars at all times was a lie".[4]

You can redeem it for £s if you want to.
There's also USDC and Dai.

 

[jayonenote]

Yes. And that ‘commodity’ is the USD. So for all intents and purposes you are getting an asset that is impacted by exactly the same factors as fiat (relative growth, interest rate differentials, valuations, trade and capital flows).

Yes, you are getting 7% but the differential is essentially credit risk - the crypto isn’t backed by a guarantor in the same way as the USD is.

That 7% will also look less attractive as rates start to rise so will need to increase when that happens. Which will reduce the existing value of the coin on a relative basis (or the peg will need to be broken).

It’s not easy to peg a currency when there is a shift in monetary conditions. We are at the top of a cycle for that at the moment.

You can get 5% for GBP.
At the moment you get less than 1% in a bank.
How long do you think your money in the bank will be earning 5%.?
Months.. 1 year.. 3 years.. 5 yrs or more.?
Take your pick.

 

[mill]

You can get 5% for GBP.
At the moment you get less than 1% in a bank.
How long do you think your money in the bank will be earning 5%.?
Months.. 1 year.. 3 years.. 5 yrs or more.?
Take your pick.

I’m not denying the returns are good. I understand the differential between short term rates and what crypto pays. But it’s not equivalent. For a start, you are backed by the FSCS up to £85k on a bank account. You don’t have the same recourse in crypto.

You can about 9% on a HY bond. But there are risks associated with that.

You get 7% on ‘cash’ for crypto because there are additional risk premia associated with the investment. That’s it.

 

[LinekersLegs]

You can redeem it for £s if you want to.

It isn’t the specific currency that really matters though - it is if they have the resources to meet any requests to convert back to fiat. And whilst In theory you can redeem, in practice they really have very little cash on hand if there was a increase in people wanting to convert and they haven’t exactly got a pristine reputation for honesty.

Tether reveals a breakdown of its reserves for first time since 2014 launch

Stablecoin issuer Tether has revealed a breakdown of its reserves, providing specific percentages for each category.

www.theblockcrypto.com

As I understand it USDC has at least been audited by a reputable outside firm so better chance of being able to redeem in a volatile market but tbh even then it seems there is a bit of fine print

Examining the complex web of USD stable coins

A brief look on some USD stable coins

omarabid.com

USDC has around $700mn in market cap but it’s relatively illiquid compared to USDT on the exchanges where it’s trading. Which means you’ll incur high spread costs if you were to buy or sell it. You can redeem it at full face value in Coinbase, though.

USDC is audited by Grant Thornton which is a well known audit firm. That’s important since the audit veracity is as good as the reputation of the audit firm. USDC publishes monthly reports, so I picked the last one to read.
The report is basically an assertion from Circle; and Grant Thornton expressing an opinion that the assertion is, in fact, correct.

Circle Internet Financial, Inc.’s management is responsible for its assertion.
Our responsibility is to express an opinion on the Reserve Account Information in the accompanying Reserve Account Report based on our examination.

The assertion is Circle holding enough USD to cover for the USDC token they have issued. But there is a bit of a word salad in the report.

 

[LinekersLegs]

I’m not denying the returns are good. I understand the differential between short term rates and what crypto pays. But it’s not equivalent. For a start, you are backed by the FSCS up to £85k on a bank account. You don’t have the same recourse in crypto.

You can about 9% on a HY bond. But there are risks associated with that.

You get 7% on ‘cash’ for crypto because there are additional risk premia associated with the investment. That’s it.

In 2008 pre crash I thought the housing and stock market a bit frothy so raised a lot of cash and Schwab had a money market fund that they marketed as being safe but with a little extra yield.

Turned out the way the supposedly “safe” fund was getting that extra yield by using mortgage bonds which then promptly blew up - thankfully I was able to sell very early on as was reading some clued in commentators but many weren’t as lucky.

Charles Schwab settles SEC allegations that it misled investors about risks of bond fund

Charles Schwab settles SEC allegations that it misled investors about risks of bond fund

www.latimes.com

No such thing as a few lunch...

 

[mill]

In 2008 pre crash I thought the housing and stock market a bit frothy so raised a lot of cash and Schwab had a money market fund that they marketed as being safe but with a little extra yield.

Turned out the way the supposedly “safe” fund was getting that extra yield by using mortgage bonds which then promptly blew up - thankfully I was able to sell very early on as was reading some clued in commentators but many weren’t as lucky.

Charles Schwab settles SEC allegations that it misled investors about risks of bond fund

Charles Schwab settles SEC allegations that it misled investors about risks of bond fund

www.latimes.com

No such thing as a few lunch...

All the cash funds had the same issue!

They were paying 5% back then, daily liquidity. People forget that those kinda rates were the norm. And that we’ve been in an unprecedented low rate environment that will start to reverse from here.

 

[nikom court]

Bitcoin crashed 40% and nobody was bailed out,that's how markets should work!

 

[Kev The Rat]

All the cash funds had the same issue!

They were paying 5% back then, daily liquidity. People forget that those kinda rates were the norm. And that we’ve been in an unprecedented low rate environment that will start to reverse from here.

that is your opinion but i seriously doubt it will happen. the governments of the world are in money printing mode, have no intention of changing course and need interest rates low in order to maintain the charade.

 

[Kev The Rat]

 

[Efcjake]

View attachment 128322

You bitcoin folks are basically superheroes kev

Saving the world lol lol lol lol

 

[Daveysgingerlovechild]

What about them chocolate coins you used to get to decorate Christmas trees? They worth much?