The title is misleading. Bitcoin isn't reliant on Stablecoins. DeFi, is but DeFi !== Bitcoin...
stablecoins enable the ability to exit bitcoin at any time without having to take risk on another equally volatile coin.
Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
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Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#192Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#193The title is misleading. Bitcoin isn't reliant on Stablecoins. DeFi, is but DeFi !== Bitcoin...
While tether gets piped around ethereum between centralized exchanges, few on chain defi applications actually use tether outside of a few stable coin focused swapping apps. Most of the lending and borrowing apps prefer USDC or Dai.
DeFi now has a plethora of 'stablecoins' thanks to innovation of algo-stables.
Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#194Earlier quoted context omitted.
Having all that Tether massively increases trade volume. Exchanges make money on fees, which of course rise proportionally to trade volume.
>Having all that Tether massively increases trade volume. How? Having massive amounts of tether in your wallet doesn't increase trade volume, having users who trade increases trade volume. If I own 1B USDT and deposit it to some random exchange and let it sit there, the volume isn't going to change one bit.
I think it would work on margin trading. Having more asset allows to lend to more margin traders. Which also more risky so more chances for the exchange to get fees
Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#195Bitcoin's reliance on Stablecoins? I think the wsj is confused and has this backwards. Additionally, like all mainstream media sources, they cannot seem to understand that Bitcoin is what happens on the blockchain and that 99% of the breathless hype about trading and finance bro stuff is completely off chain and only tangentially related to Bitcoin.
Don’t underestimate the importance of market makers - people who create liquidity on the exchanges by constantly resting buy and sell orders on the book, the modern equivalent of the guys on the exchange floor in the bright jackets. Exchanges without market makers lose business to exchanges with market makers. In general, it is rational to trade on the markets with the tightest spreads. Market makers need mechanisms…
I'd really love to learn more about the dynamics of market makers.
Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#196Earlier quoted context omitted.
Something is off in USDC land though: https://news.bitcoin.com/usdc-attestations-run-late-raising-...
The March attestation was published 5/24 (the day prior to that article) and is available on the Centre website[1]. It doesn’t appear there’s cause for alarm in this case. [1] https://www.centre.io/hubfs/pdfs/attestation/grant-thorton_c...
Note that apparently attestations just validate that a certain bank account had a certain number at a certain time, which obviously does not account for loan obligations. In Tether's case
> https://www.singlelunch.com/2021/05/19/the-tether-ponzi-sche...
> [Tether was] Failing to complete an audit and settling on an attestation “for transparency”. The morning of the attestation, tether moved $380m from sister company bitfinex into a bank account to pass the verification
Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#197Honestly stablecoins - specifically tether - is about the only thing about crypto that genuinely frightens me. Crypto rollercoaster - up down sideways and in circles - sure I'm game. Tether that is stable until it implodes...hell no. Even without direct exposure the blast radius worries me.
The frightening things are the most transformative. Decentralized stablecoins represent a huge class of use-cases for blockchain. You don't have to tether the value of a stablecoin to a fiat currency necessarily.
The ask is not hard: introduce dollar reserves and swap lines into the ecosystem, and don't touch the principal. Yet no stablecoin has been able to make this guarantee.
Other kinds of assets beyond the dollar are not relevant to retail traders the same way the majority of traders are unlikely to take want to take physical at the end of a futures commodity contract. In the end they will want the dollar amount.
Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#198Earlier quoted context omitted.
Why does it matter? They owe you the money in the first place. If they’re ill-intentioned they can just refuse to redeem your coins, or require that you send them to a new contract with different rules. There’s no reason credit instruments should be on a blockchain in the first place, given you’re depending on a central party for redemption.
> There’s no reason credit instruments should be on a blockchain in the first place, given you’re depending on a central party for redemption. Can you elaborate? Say you issue RUNEKs, how do we move them around freely in a digital world with the assumption that you are not required for transfers?
Runek seems more likely to be asking, why pay the very high price of putting a trusted instrument on a trustless blockchain. Which I believe is a fair question.
Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#199Earlier quoted context omitted.
Honestly Tether doesn't really to be that much different compared to fractional reserve banking. The biggest difference is the government protects banks from bank runs while Tether enjoys no such privilege.
There are complex and strict rules around commercial banks that direct to their loan to value ratios, capitalisation and auditing arrangements (Basel accords). Tether is not subject to this. The biggest difference you highlight is a big difference. On youtube, you can watch a series of documentaries by Milton Friedman, Free to Choose. In an early episode of this, he explains how the Great Depression was triggered by…
Of course. The solution is to have governments back currencies like USDT, BUSD, USDC, Dai, etc. If they're gonna bail out financial institutions when they screw up, Tether should be no exception.
Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#200I keep thinking of Madoff's fund. It was once called "the Jewish T-bill". It worked just fine until there was a significant net outflow. Then, total crash, because the backing assets were not there. Tether is way too much like that. Remember, Tether has no upside . There is no reason to ever hold Tether for any length of time. [1] https://www.timesofisrael.com/before-dying-bernie-madoff-lif...
Stablecoins are an unfortunate side-effect of limited banking for the crypto industry. For the longest time, even legitimate exchanges had issues getting deposits/withdrawals working properly with normal banking system. Most traders I know use tether to move funds between exchanges for arbitrages and/or wait out a correction. Some are also using it to generate yield, but other than that, nobody is holding onto it for…
imho this observation of you just adds to every "stablecoins are a scam"-post. If there is indeed no significant outflow out of the stable-crypto system, I don't know what's stands in the way of companies to just print money out of thin air in there - which then goes to prop up bitcoin, bringing in real money from the bagholders.