The fact that USDC is down before Tether is fascinating.
One has proven reserves and has been open about its losses, thus is suffering for it.
The other is one of the biggest financial frauds in history and has no open information about its reserves, has suffered known losses in the past and failed to inform customers… keeps going.
It is an irony that USDC is down while Tether is up. It is always good to know other opinions about this in this interesting thread.
Another example, a stable coin based on BTC collateral, Money on Chain (MoC) [1] is working fine and worked fine in the past depeg issue with DAI. This is a great test for a collateral based stable coin. This is always a warning to news addicts that should realize crypto media is not trustworthy.
It seems now that the CeFi and DeFi worlds were more interlaced than we thought before. This is a new challenge.
If Circle and its VC backers don't take the right decisions (e.g. restore the peg even with hard moves) the trust will break for the traditional financial world as well.
Tether had such enormous USD inflows that it all comes down to how they played the rising interest rate environment and maaaybe exposure to Chinese bonds, not whether or not they were fraudulent even as late as a few years ago.
If they did a good job dancing to the music, even a poly-billion dollar hole in their balance sheet will rapidly heal, if it hasn't already. If they did a poor job dancing to the music (see: SVB), this sin would eclipse the comparatively small matter of shady founders pocketing a billion or three.
I would too, but my tradbank where I have my fiat does not process transfers on weekends :(
So the money I want to send from my bank to Kraken, will not arrive until Monday. By that time this whole thing could already be over and USDC could be back at a dollar per pop.
Well, probably it is for the best anyway. I will spend my fiat to buy more Bitcoin instead. It is cheap too, currently.
If I were to spend my fiat on underpriced USDC, there is no telling how long I would have to hold those USDC before the situation is resolved and USDC gets back to its $1 peg.
Don't know what this 1.000 is supposed to mean, but Uniswap is never trading dollars anyway: they do not exist in defi.
One can calculate the implied USDC/USDT rate from that very page by pricing a swap for 1 ETH or BTC for USDT vs same for USDC. The USDT quote is similar to CEXes for dollars, and the USDC is substantially higher, aka value of 1 USDC is well below 1, on Uniswap itself.
I imagine if they just said we had 8% of our reserves in SVB, now we have none.
It would probably be interpreted as they didn't lose money and no body would notice.
Yeah, it seems like the SVB reserves are being treated as lost, even though my understanding is that most of the uninsured deposits should be returned (it’s not like SVB was a scam—they had substantial assets, even if not quite enough).
This is the most tempted I’ve been to buy a stablecoin, but I will stay on the sidelines and just watch this one. Edit to clarify: USDC seems like one of the most “above board” stablecoins, but I’m still extremely skeptical stablecoins generally, given their collective history.
Edit: one issue I see is that, given herd mentality and skittishness, it is possible that > 90% of USDC gets withdrawn quickly enough that you could get left holding the bag. Even if USDC is 99% backed, that doesn’t help if you’re left with the last 1% of it (unless the backing company decides to make you whole, at their own loss). I could see that scenario playing out in the crypto world, so I’m happy with my decision to stay away.
That feels like an overreaction given that DAI has only ever been 30-50% USDC and USDC lost 8% of reserves. Though there probably is a loss of trust which is harder to quantify.
USDC != UST, it is backed by assets. Some of those assets were in SBV, which is why it is down... but 90% of the assets were not, we know the number because Circle is transparent, and has 3rd party audits.
Coinbase seems to be taking steps to have enough liquidity at all times. So they don't lend "or take any action" with user funds unless the user explicitly instructs them to.
> The vast majority of Coinbase client cash is stored in FDIC-insured bank accounts. When a client has a large dollar balance, Coinbase stores their cash in a U.S. government money market fund to keep it safe and liquid. Like all assets on Coinbase, we hold client cash 1:1 and your assets are your assets. We do not lend or take any action with your assets unless you specifically instruct us to.
Doing something like you describe what also be a huge risk, what happens if USDC falls to 0? Everyone lost their funds? I'm sure there would be countless lawsuits if that was to happen.
Easier said than done: they don't have that many assets that are their own; the market depth at 0.9 is probably not much; and they, like everyone else, would take the risk USDC ultimately gets redeemed at 0.9 or whatever the shortfall ends up being. Plus their compliance dude is going to throw a tantrum.
If you want an alternative, the cleanest decentralized stablecoin IMO is Liquity https://www.liquity.org/
It’s single collateral MakerDAO-style over-collateralized coin (only ETH) and the ability for admins to change it was destroyed. So it just lives in perpetuity exactly the way it was deployed, no chance of blacklists or courts turning it off.
If I'm understanding this correctly... You can take an interest free loan out against your Ethereum and leave your Ethereum untouched. What happens if many people do that and never repay the loan?
As soon as you tether these 0% rate markets to something else, you are suddenly dealing with real like risk that cannot be ignored.
> The ability to redeem LUSD for ETH at face value (i.e. 1 LUSD for $1 of ETH) and the minimum collateral ratio of 110% create a price floor and price ceiling (respectively) through arbitrage opportunities. We call these "hard peg mechanisms" since they are based on direct processes.
> LUSD also benefits from less direct mechanisms for USD parity — called "soft peg mechanisms". One of these mechanisms is parity as a Schelling point. Since Liquity treats LUSD as being equal to USD, parity between the two is an implied equilibrium state of the protocol. Another of these mechanisms is the borrowing fee on new debts. As redemptions increase (implying LUSD is below $1), so too does the baseRate — making borrowing less attractive which keeps new LUSD from hitting the market and driving the price below $1.
> > The ability to redeem LUSD for ETH at face value (i.e. 1 LUSD for $1 of ETH) [...] create a price floor
That is not entirely true though; it costs money to redeem LUSD for ETH. Earlier today it was 2%, so not particularly cheap. That would put the floor at 0.98 at least momentarily.
> You can take an interest free loan out against your Ethereum
Well, you do have to pay to take out a loan. Closing a loan is free, and redeeming LUSD for ETH (if it's not your loan) costs _at least_ 0.5%. And being liquidated costs you money (10%?) as well I guess.
> What happens if many people do that and never repay the loan?
Nothing? What do you think is supposed to happen?
> you are suddenly dealing with real like risk that cannot be ignored.
The only risk I know of is a cascade. If a trove drops below 110% because the ETH price drops, and someone liquidates the trove and gets the ETH at a 10% discount, and then _sells_ the ETH, the price drops even more causing other troves to be liquidated, etc.
The cascade problem is systemic: all algo stable work inevitably in a similar way, so if it starts somewhere all the protocols will reinforce the death loop. At the limit, the whole ecosystem of ether + ether-based algo stablecoins becomes terra/luna.
Crypto has no global risk manager in charge of keeping the total sum of algo stables small enough to be safe.
This is the lowest USDC has been at (0.91 USD at writing this comment), ever. So a test of the currency to say the least.
In perspective, Tether (USDT, another "stable coin") lowest was 0.91 USD at the 25th of April, 2017.
Another stable coin, DAI, is also at it's lowest point right now at 0.93 USD. DAI seems to have a big part of it's collateral in USDC, however that now makes sense...
I admittedly understand very little about the crypto ecosystem, but how is this not a death knell for USDC? Wasn't its entire premise built around maintaining 1:1 parity to the US dollar? That feels very binary to me. If one USDC does equal one US dollar, then the coin has failed, no?
They (stable coins) go up and down in small increments all the time, as the peg adjusts. Even Tether at one point was worth 0.91 USD but recovered. They've had a bunch of dips but somehow seem to always recover.
Until they don't, I guess. Haven't happened yet, but shouldn't say it's impossible.
This is not great at all. I only really deal with Bitcoin, but stable coins are a utility token. For most of us, it is entirely pointless to even think about. But for people who have extreme trouble getting access to dollars, stable coins are the way they get access to them.
So in places like Argentina it may be easier to get stable coins delivered via some neo bank than it would be to get dollars from a normal bank.
Can you imagine living in a country where your currency inflates 100% YoY and then you find a way to retain the value of your labor by converting your paycheck to a stable coin, only to have it de peg in such a way that not only wipes you out in an instance (good luck offloading those coins) but also demonstrates the entire theory of stable coins are flawed. None of them remain stable.
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[ 8.4 ms ] story [ 1791 ms ] threadhttps://twitter.com/coinbase/status/1634399032767307776
One has proven reserves and has been open about its losses, thus is suffering for it.
The other is one of the biggest financial frauds in history and has no open information about its reserves, has suffered known losses in the past and failed to inform customers… keeps going.
Another example, a stable coin based on BTC collateral, Money on Chain (MoC) [1] is working fine and worked fine in the past depeg issue with DAI. This is a great test for a collateral based stable coin. This is always a warning to news addicts that should realize crypto media is not trustworthy.
It seems now that the CeFi and DeFi worlds were more interlaced than we thought before. This is a new challenge.
If Circle and its VC backers don't take the right decisions (e.g. restore the peg even with hard moves) the trust will break for the traditional financial world as well.
[1] https://moneyonchain.com/ (full disclosure: it is a customer from my company)
If they did a good job dancing to the music, even a poly-billion dollar hole in their balance sheet will rapidly heal, if it hasn't already. If they did a poor job dancing to the music (see: SVB), this sin would eclipse the comparatively small matter of shady founders pocketing a billion or three.
So the money I want to send from my bank to Kraken, will not arrive until Monday. By that time this whole thing could already be over and USDC could be back at a dollar per pop.
Well, probably it is for the best anyway. I will spend my fiat to buy more Bitcoin instead. It is cheap too, currently.
If I were to spend my fiat on underpriced USDC, there is no telling how long I would have to hold those USDC before the situation is resolved and USDC gets back to its $1 peg.
You’d have to have assets on chain to buy them on a dex.
USDC will repeg back to $1. If it rapidly falls below 0.8, the better buy in opportunity.
A popular one is Uniswap, here is USDC: https://app.uniswap.org/#/tokens/ethereum/0xa0b86991c6218b36... (currently trading at 1.000 USD at Uniswap)
One can calculate the implied USDC/USDT rate from that very page by pricing a swap for 1 ETH or BTC for USDT vs same for USDC. The USDT quote is similar to CEXes for dollars, and the USDC is substantially higher, aka value of 1 USDC is well below 1, on Uniswap itself.
The extent of the lack of trust here (resulting in such a strong depeg) is interesting.
[0]: https://www.bloomberg.com/news/articles/2023-03-11/usd-coin-...
This is the most tempted I’ve been to buy a stablecoin, but I will stay on the sidelines and just watch this one. Edit to clarify: USDC seems like one of the most “above board” stablecoins, but I’m still extremely skeptical stablecoins generally, given their collective history.
Edit: one issue I see is that, given herd mentality and skittishness, it is possible that > 90% of USDC gets withdrawn quickly enough that you could get left holding the bag. Even if USDC is 99% backed, that doesn’t help if you’re left with the last 1% of it (unless the backing company decides to make you whole, at their own loss). I could see that scenario playing out in the crypto world, so I’m happy with my decision to stay away.
Stablecoin provider buys up cheap stablecoin: “it’s really suspicious that they’re supporting the stablecoin price, something’s wrong”
Algo “stables” like Ust might do it as a sort of bailout but that’s because they aren’t a backed 1-1 instrument.
you could buy DAI which is also trading at a discount though
> The vast majority of Coinbase client cash is stored in FDIC-insured bank accounts. When a client has a large dollar balance, Coinbase stores their cash in a U.S. government money market fund to keep it safe and liquid. Like all assets on Coinbase, we hold client cash 1:1 and your assets are your assets. We do not lend or take any action with your assets unless you specifically instruct us to.
"How is client cash stored at Coinbase?" - https://help.coinbase.com/en/coinbase/other-topics/other/cli...
Doing something like you describe what also be a huge risk, what happens if USDC falls to 0? Everyone lost their funds? I'm sure there would be countless lawsuits if that was to happen.
And once the government takes over a bank they make everything alright because they don’t want people to question the entirety of the banking system.
It’s single collateral MakerDAO-style over-collateralized coin (only ETH) and the ability for admins to change it was destroyed. So it just lives in perpetuity exactly the way it was deployed, no chance of blacklists or courts turning it off.
As soon as you tether these 0% rate markets to something else, you are suddenly dealing with real like risk that cannot be ignored.
> LUSD also benefits from less direct mechanisms for USD parity — called "soft peg mechanisms". One of these mechanisms is parity as a Schelling point. Since Liquity treats LUSD as being equal to USD, parity between the two is an implied equilibrium state of the protocol. Another of these mechanisms is the borrowing fee on new debts. As redemptions increase (implying LUSD is below $1), so too does the baseRate — making borrowing less attractive which keeps new LUSD from hitting the market and driving the price below $1.
That is not entirely true though; it costs money to redeem LUSD for ETH. Earlier today it was 2%, so not particularly cheap. That would put the floor at 0.98 at least momentarily.
Well, you do have to pay to take out a loan. Closing a loan is free, and redeeming LUSD for ETH (if it's not your loan) costs _at least_ 0.5%. And being liquidated costs you money (10%?) as well I guess.
> What happens if many people do that and never repay the loan?
Nothing? What do you think is supposed to happen?
> you are suddenly dealing with real like risk that cannot be ignored.
The only risk I know of is a cascade. If a trove drops below 110% because the ETH price drops, and someone liquidates the trove and gets the ETH at a 10% discount, and then _sells_ the ETH, the price drops even more causing other troves to be liquidated, etc.
Crypto has no global risk manager in charge of keeping the total sum of algo stables small enough to be safe.
At the very least, FB, when they were still trying to offer a stable coin called these properly.
What a freaking joke the folks managing USDC are stashing all of their eggs in the same basket.
Shorting stable coins seems to be an inverse of that.
In perspective, Tether (USDT, another "stable coin") lowest was 0.91 USD at the 25th of April, 2017.
Another stable coin, DAI, is also at it's lowest point right now at 0.93 USD. DAI seems to have a big part of it's collateral in USDC, however that now makes sense...
Until they don't, I guess. Haven't happened yet, but shouldn't say it's impossible.
So in places like Argentina it may be easier to get stable coins delivered via some neo bank than it would be to get dollars from a normal bank.
Can you imagine living in a country where your currency inflates 100% YoY and then you find a way to retain the value of your labor by converting your paycheck to a stable coin, only to have it de peg in such a way that not only wipes you out in an instance (good luck offloading those coins) but also demonstrates the entire theory of stable coins are flawed. None of them remain stable.