USDC may have instant 24/7 access to global markets. But why did the price of USDC drop to 90 cents this weekend. It isn't immune bank runs.
However note
- SVB was closed on a Friday (as is the FDIC's custom). This meant that USDC could not process redemptions over the weekend as banks were closed, and this created fear in the market.
- USDC had 8% of their reserves trapped in SVB. The fair market value of USDC would have been $0.92 if all SVB deposits were lost, which was never likely.
- crucially, USDC operator Circle has acknowledged the need to transition to a "full reserve" model where reserves aren't subject to bank runs. https://twitter.com/jerallaire/status/1635548066185871360
- over the weekend, USDC did lose its $1 peg and trade as low as ~$0.88. However, all USDC holders were able to maintain access their USDC to do whatever they wanted with it, which is a lot better than SVB depositors frozen and waiting to see what happened.
> the UX of stablecoins is becoming vastly superior to bank deposits because you'll be immune to bank runs, control your own money, and have instant access to global markets, including for low-risk yield on your stablecoins, such as in treasuries or over-collateralized lending
I disagree, but OK
> over the weekend, USDC did lose its $1 peg and trade as low as ~$0.88
Hmmm doesn't seem like a Very Good Deal for an ordinary person.
> However note
Oh, now I see what you're doing. It's a Very Good Deal, except reasons
> However, all USDC holders were able to maintain access their USDC to do whatever they wanted with it
So it might have dropped 12%, but they still had access. That's a win to you?
Your definition of stable is vastly different than mine.
My FDIC backed bank account is guaranteed not to lose value.
I don't understand the cognitive dissonance on display here.
Wait... I need to explain this? I don't even believe in it.
I'm not really interested in arguing theoretical constructs. You yourself admitted that just last weekend a stablecoin dropped to 88 cents on the dollar (while my bank dollars were still worth one dollar each).
Before I prove anything, why don't you start by proving (heck just demonstrate) a long term stable stablecoin. Just saying it's stable doesn't make it so.
I have dollar deposit protections now. Love or hate the fed, at least you're dealing with a known quantity, and a boatload of laws that are actually (historically demonstrable) enforceable.
There are no regulations or protections in the crypto space, only a bunch of hollow promises.
Until the crypto community can actually demonstrate long term stability (and stable audited reserves) of any so called "stable" coin, I'm not interested in discussing financial theocraticals, let alone moving my dollars out of my FDIC insured bank accounts.
In other words, both USDC and uninsured SVB deposits had the same market response over the weekend. But every USDC holder had unfettered access, whereas only large SVB depositors were able to access the informal market of private sellers.
I want you to remember this interaction because by the end of the decade, there will be over $1 trillion of USD stablecoins in circulation (in today's dollars), and at least one of the five largest banks in America will run a major stablecoin product of some kind, such as their own stablecoin, redemptions for an existing coin, or consumer on/off-ramps to the crypto financial system.
The key point is that those were uninsured deposits.
Anyone under FDIC protection was fine.
At best a stablecoin is like an uninsured bank deposit, in an unregulated bank. No thanks, I'll stick to FDIC coverage.
This is an excellent Freudian slip
Circle before and after the SVB crisis (which happened during a friday night and through the weekend) continued to issue/redeem their tokens at par with the dollar.
It is market sentiment which temporarily devalued USDC.
You would have obtained exactly the same thing if US dollars held in SVB bank accounts were denominated in a virtual currency named "USD-SVB" and a 24/7 blockchain operating the transactions.
Before/After the crisis each USD-SVB would be reedemable for $1 but DURING the crisis I bet you my house those USD-SVB would have fallen like a rock on the dollar.
I know it's good to be anti-crypto on HN but please, try to not completely close your mind to the subject