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Comment by patio11 | Hacker News Reader

It's remarkable that a stablecoin which was able to mostly maintain the peg for years at a time now needs to redefine what being pegged means, and that this state of affairs has continued for more than a week. That's why I mentioned it.

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Peeking at the long term chart[1], I don't think 0.1% is notable. In Oct 2018, it bounced around ~1% under the peg for most of 2 months. Then in Dec 2018, it bounced around 1-2% over the peg for 2 months. A similar swing happened in Apr-Jun 2017. I'm actually surprised, I've never looked at this chart before and I didn't expect to see swings of several percentage points. But at any rate the current 0.1% is pretty tame in comparison and I'm sure it's just the cost of moving money to arbitrage.

[1]: https://coinmarketcap.com/currencies/tether/

On https://coinmarketcap.com/currencies/tether/historical-data/ you can see that all the highs for the past 7 days have been strictly under $1, has this ever happened before?

If you zoom in to the first time period I mention (Oct 2018), and inspect visually, it was strictly under $1 for nearly two months. Right after that it was strictly over $1 for nearly two months. That's if you trust that site's data of course.

Remember this is the price on the secondary market, and these are just random people who see the price and then shuffle money around so they can buy a dollar for 99.9 cents. Anyone can do it (if you can stomach exposure to USDT of course). So if the system is working properly the price should generally hover within $1 plus or minus the cost to move money, but there's nothing keeping it at exactly $1.000000.

coinmarketcap/coingecko are generally not very reliable for evaluating the stability of stablecoin pegs

most liquidity tends to aggregate on dexes like Curve, which is also where you could have seen the whole LUNA/UST debacle play out in real time as large actors swapped out of UST into USDC/USDT/DAI

> now needs to redefine what being pegged means

Completely. For context, "the Reserve Primary Fund broke the buck when its net asset value (NAV) fell to $0.97 cents per share" [1].

[1] https://www.investopedia.com/articles/economics/09/money-mar...

That's something different, though. Money market funds are meant to be safe interest bearing investments: they're expected to give a small positive return on investment in normal times, and to be safe enough that people will at least get their original investment back in bad times. That's why it's a big deal when something happens which causes them to return less than was invested by any amount: a safe investment, which gave lower returns in exchange for that supposed safety, wasn't.

The goal of Tether is a little different. One USDT is meant to be worth one USD. It's just as much a problem for the purposes people use it for if USDT is trading above one dollar as below, because they're paying more than its value. That is, the Tether peg is meant to be two-sided, both above and below, and all that's happened is that it's gone from trading at slightly above the nominal value to trading slightly below it. That's not really "breaking the peg" in any meaningful sense.

> money market funds are meant to be safe interest bearing investments

Tether is supposed to be a safe non-interest bearing instrument. (Its promoters just keep the interest.)

On the other hand DAI fluctuates between 0.999 and 1.001 all the time. Is it not "stable".

I am no fan of tether, but small fluctuations like this have always been normal for "stable coins".

That’s the point. Dai goes below and above $1. Tether has stuck below $1. That’s an important difference.

Longer comment: https://news.ycombinator.com/item?id=31449400

This might be fine in a open regulated market. See my above comment.

This is why in regulated markets you can inspect the ticker: to provide a audit record for proof that nobody is funding themselves or the asset by arbitrage.

DAI has been designed to be soft-pegged. It is meant to fluctuate around the $1 mark, but it never guarantees any kind of parity.

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