Hacker News Reader

Comment by bb88 | Hacker News Reader

After the fall of Terra, it's clear that stablecoins can only go down in value. There's also no FDIC to step in to take over the failing stablecoin. You're trusting USDC and by extension BlackRock to do the right thing here.

If it's not a security than it's not regulated.

View on HN

...it's clear that stablecoins can only go down in value

That's just a truism, regardless of the stablecoin or the state that it's in. No-one should ever expect a $1 stablecoin to trade significantly higher than $1, since the creators of the coin can easily arb the difference to pocket some free money.

Actually, certain alogrithmic "stablecoins" are designed to oscillate around fiat so it is possible to be higher than $1. An example is AMPL: https://coinmarketcap.com/currencies/ampleforth/. Of course, its value oscillates so much that "stable" might be a misnomer, but that is its goal.

Terra was no stablecoin and it has been constantly pointed out that it wasn't.

USDC is backed 1 USDC for 1 USD. What you're actually seeing here is that the traditional finance system has lead to a crash in crypto. That's almost refreshing. Usually crypto fucks up by itself (see FTX and Terra for the most recent ones).

1 USD worth of treasuries or bank deposits, not a USD directly.

What's their balance sheet at the moment assuming 8% of cash is missing? Is it still 1:1 or 1:.94?

Also coindesk says TerraUSD is a stablecoin.

https://www.coindesk.com/price/terrausd/

Washington Post too:

https://www.washingtonpost.com/business/what-are-stablecoins...

Also Gemini says it as well:

https://www.gemini.com/en-us/prices/terrausd-ethereum

Their balance sheet is still 1:1 as the 8% at SBV has not yet been written off.

The market reacts faster of course but the market has no crystal ball. It can't predict what's going to happen.

> USDC is backed 1 USDC for 1 USD

It’s at least 87¢ and 23¢ of priority unsecured claims on a bank in receivership.

I assume you're deriving the 23¢ from the 23% they have banked, but I would like to note that of that 23%, roughly a third (3.3bn of 9.7bn) was with SVB. The rest was with other banks not facing the same issue.

Arguably, the FTX debacle is in the same bucket, as it was caused by people having their money on an exchange that essentially functioned like a fractional reserve bank.

FTX functioned more like a self-flushing toilet.

Over the last 24 hours USDC had a low of $0.85 at 3 AM EST to a high of $0.98 at 3 PM EST.

I wonder how many startups would take a 2% - 15% cut to withdraw their money for short term expenses.

Is there a secondary market for deposits at banks? Like a Silicon Valley Bank Stable Coin (Probably would have been called a Silicon Valley Dollar before 1913)

Terra was collateralized by crypto. USDT is collateralized by… something, maybe. Given that USDT always regained its peg regardless, the depeg of USDC seems like an overreaction.

USDT always regained its peg until one day it doesn't

Terra regained it's peg until it didn't.

Terra is not even in theory backed by real dollars, it had a known failure case, which did in fact occur. Again, the market priced that risk at virtually zero until the failure case was tangible.

That day will be when they finally release an audit

This will never happen, it’ll have to be when redemptions stop working.

Is there any proof that anyone has ever successfully redeemed USDT from Tether?

Yes, there are even people on HN that have reported successful redemption of tether for USD. You can ask people directly. It's not like this is a rare thing that never happens. If people weren't able to do so you would expect people to actually make claims aginst it.

I have not seen anyone on HN ever claim to have exchanged the necessary 100K USDT for $99k or 1M+ USDT for $1M+ with Tether's parent company.

Look back to one of the Tether submissions and you will find someone who says that their company was able to do it.

They may well be 100% collateralized in bad collateral. Same for USDC really, except the collateral is not as bad.

100% of $0. Tether is entirely a scam by intentional criminals and not a single dollar is in a vault.

They say they're 1:1 backed but have committed obvious financial fraud around this. There's no benefit to them to be even 95% backed, it's 100% or jail, so why would they bother?

This is how they maintain the peg perfectly - it's all fake. They "redeem" their friend's Tether with their personal funds but they won't even try if there's a run.

> it's 100% or jail

Says who?

That is not the point. USDT repegged from far worse news. It is a hot potato, but the market used to price that risk at almost zero for 99.9% of the time.

Reply on news.ycombinator.com