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Comment by collectedparts | Hacker News Reader

It's also a general expression of lack of confidence in the US banking system.

Exchanges that offer true "USD" trading pairs ultimately have to store that cash [at a bank] somewhere. But at which bank? Before this week, most people probably wouldn't have paid attention.

Some like Coinbase offer passthrough FDIC insurance [1], but again, if you have more than $250k you're potentially s-o-l just like an SVB depositor.

So weirdly, 1 USDT ("definitely sketchy but somehow has never broken peg") all of a sudden may seem less risky than 1 "USD" at [which bank again?].

[1] https://www.coinbase.com/legal/insurance

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> somehow has never broken peg

But all past stablecoins never broken the peg before they did.

> It's also a general expression of lack of confidence in the US banking system.

that's not it. there are far better gauges of dissatisfaction in US banking, share price in banks is a far better gauge. if you want a metric for USD then swiss franc is better.

USDC and other "stable coins" are risky, noisy and generally bad medium to long term investments. Unlike domestic currency they have such small trading volumes that they are easy to manipulate.

Thats great if you're the one doing the manipulation. At best they perform better than cash, but without any of the protection, at worst they go bust. Emerging markets have less fraud than generic crypto backed devices.

USDC is not an investment, it's a tokenized market money fund which you can redeem for 1$. Circle, they company issuing it, said that they will honoring redempetions 1:1 from tomorrow (weekend they can't because of bank closures).

Also the trading volume of stablecoins and of the largest cryptocurrencies is close on most day to NASDAQ's listed equities trading volume.

> said that they will honoring redempetions 1:1 from tomorrow

until they run out of capital/credit.

> USDC and other "stable coins" are risky, noisy and generally bad medium to long term investments. Unlike domestic currency they have such small trading volumes that they are easy to manipulate

How are you supposed to manipulate a currency pegged to the USD? It'll fluctuate a bit above or below, but not by much except in extreme cases. And even in those extreme cases, it seems like the peg gets restored eventually. Talking mainly about USDC, USDT and DAI here, as those have all been "depegged" and subsequently restored their peg afterwards.

> How are you supposed to manipulate a currency pegged to the USD?

To keep a peg you have to "defend" the value of said pegged monetry instrument.

That means when the value drops below the peg, the "owner" has to buy back the "currency" at a high enough value to keep in within the peg. They have to crash liquidate possibly long term investments, or use a credit facility. This is expensive.

As you know, the value of traded things is defined by the current buy/sell price. If you are only trading a few thousand times a day, those people who trade have much more power. All it takes is a few million, and you can trade between a few accounts effectively setting the price of the market.

Which bank does USDT hold their pegged dollars in, again?

Alone the fact that every stable coin created itself out of thin air when bought, makes this tremendously stupid.

> But at which bank?

One that has adequate risk management controls, attempts to comply with Basel 3 etc.

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