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Coinbase suspending USDC:USD conversions over the weekend

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Re: Coinbase suspending USDC:USD conversions over the weekend

#71

Post by mtlmtlmtlmtl »

pclmulqdq wrote: post #44
mtlmtlmtlmtl wrote: post #5

Earlier quoted context omitted.

Can't help but revel in the fact that these crypto ponzi schemes are so dependent on the very banks all the cryptobros denounce, as evil holdovers from the past that will be obsoleted by their scam tokens (that no one outside their bubble even knows how to use). It's so ridiculous I just have to kind of admire it. It's like a cathedral of human hypocrisy.

A ponzi scheme is just one step along the path to true decentralization.

It's kind of telling that I truggle to tell whether this is satire. I could totally see a cryptobro unironically making this claim.

Re: Coinbase suspending USDC:USD conversions over the weekend

#72

Post by TheAlchemist »

blitzar wrote: post #67
Grimburger wrote: post #15

Tether, the Sauron of stablecoins, has zero exposure to SVB and is holding the peg just fine. Sorry Patio and friends, maybe next time :)

> Tether has zero exposure to SVB It turns out if you have no assets you have no exposure.

Heh, I come here to write exactly the same comment !

You can't have exposure, if you don't have any real assets.

Frankly, this is all mind blowing - it will be in all finance books in the future, and we have the privilege to see it happening.

Re: Coinbase suspending USDC:USD conversions over the weekend

#73

Post by PeterisP »

tylersmith wrote: post #59
koolba wrote: post #57

Earlier quoted context omitted.

Coinbase should be buying that USDC on chain. They can guarantee it's worth $1 to themselves.

They can't if the USD backing the USDC is stuck in SVB.

Well, not all USD is stuck in SVB, at least according to what they claim. If Coinbase knows that they have the reserves to back USDC, or 93% of the reserves to back USDC, then them buying back any USDC on the open market at 90% or less is huge amounts of certain profit, while everyone else has to gamble on what the Coinbase actual capabilities are and in many cases are willing to accept a haircut to gain certainty.

Re: Coinbase suspending USDC:USD conversions over the weekend

#74

Post by selestify »

re-thc wrote: post #66
pcthrowaway wrote: post #34

Earlier quoted context omitted.

Is a bank a ponzi scheme if its assets don't exist also? Like if a bank has $10B in customer deposits and one of their armored truck drivers escapes across the border with $2B, then some customers can't be paid back when they try to withdraw, does that make it a ponzi?

If you can't be paid at all it's not a Ponzi. The point is to rely on newer funds to pay the older requests.

Banks also rely on “newer funds” (from loan payments) to pay “older requests” (customers withdrawing their deposits). When withdrawals from old requests rise so much that they can’t be covered by new funds, banks collapse.

Re: Coinbase suspending USDC:USD conversions over the weekend

#75

Post by espadrine »

pclmulqdq wrote: post #50
rippercushions wrote: post #48

Earlier quoted context omitted.

There's something deeply ironic about a flight to safety in the form of Tether , which has famously been described as being "quilted out of red flags". But if you can't redeem it and it's not backed by anything remotely approaching normal assets, I guess you can't have a bank run on it either... until the music stops and the insiders propping it up run out of chairs.

There's something to be said for everyone knowing the risks of doing business with you, and behaving consistently (consistently badly) so that those risks don't change. That's the regime of Tether. Nobody will even be mad when the rug gets pulled. The federal reserve could stand to learn a thing or two, honestly.

What could the Federal Reserve learn?

The structure of risk is similar for both Tether and Circle, AFAICT. While USD risk is heavily distributed across many regulated banks and there are measures in place to mitigate bankruptcy, USDC/T is fairly centralized and the fall of a single bank can put the entire currency at risk, cause sudden and extreme inflation (as is the case now), and potentially stop being accepted by even more merchants.

USD risk exists, but seems lower than USDC/T risk, and the same is true for its volatility. All in all, I am not surprised that there are more merchants that accept USD than USDC/T, and the change in methodology that would make the latter competitive would likely require taking a page from the Federal Reserve, not vice-versa.

Re: Coinbase suspending USDC:USD conversions over the weekend

#76

Post by [deleted] »

rippercushions wrote: post #48
kersplody wrote: post #4

USDC is managed the Centre consortium, which was founded by Circle and includes Coinbase as a member. Circle held around $3.3 billion in Silicon Valley Bank, leading to a run on USDC which resulted in it trading for as little as $0.95 on some exchanges today (Mar 10, 2023). This represents around 30% of USDC's cash reserves and 7% of its total reserves. The balance of reserves are held in T-Bills, which are liquid an…

There's something deeply ironic about a flight to safety in the form of Tether , which has famously been described as being "quilted out of red flags". But if you can't redeem it and it's not backed by anything remotely approaching normal assets, I guess you can't have a bank run on it either... until the music stops and the insiders propping it up run out of chairs.

[deleted]

Re: Coinbase suspending USDC:USD conversions over the weekend

#77

Post by makomk »

silasdavis wrote: post #45
re-thc wrote: post #29

Earlier quoted context omitted.

Can't you just buy USD directly? How does that help? What does the C part of it do?

It is also kind of an abstraction over cash and treasury bonds. A more liquid fractionalised cash/bond unit. Though that seems to have been the problem here. The original idea with a 100% collaterilised peg was that the entire reserve would be cash. Somewhere along the way treasury bonds were considered cash equivalent. Which on the face of it seems sort of reasonable but clearly they do have a different risk and liq…

Having the entire reserve as cash wouldn't exactly help here - imagine if 30% of USDC's total reserves was in Silicon Valley Bank, rather than just 30% of their cash. (I think I've pointed out before in discussions of Tether etc that stablecoins can't safely just hold their rexerves as cash in a bank account because banks can and do fail and FDIC protection basically does nothing at this scale, but I wasn't expecting it to be demonstrated quite so spectacularly.)

Re: Coinbase suspending USDC:USD conversions over the weekend

#78

Post by jleahy »

cornholio wrote: post #62
kersplody wrote: post #4

USDC is managed the Centre consortium, which was founded by Circle and includes Coinbase as a member. Circle held around $3.3 billion in Silicon Valley Bank, leading to a run on USDC which resulted in it trading for as little as $0.95 on some exchanges today (Mar 10, 2023). This represents around 30% of USDC's cash reserves and 7% of its total reserves. The balance of reserves are held in T-Bills, which are liquid an…

It was all fun and games while the crypto bubble was inflating. You basically could do no wrong, any mismanagement would be hidden away by the exponential appreciation of the underlying assets; just hodl until the next bull run and everything would be fine again. When things stabilize and start going down, it's like the morning after the frat-party, bad things come to light. Crypto is fundamentally a negative sum gam…

You never know who's swimming naked until the tide goes out.

Re: Coinbase suspending USDC:USD conversions over the weekend

#79

Post by raverbashing »

rippercushions wrote: post #48
kersplody wrote: post #4

USDC is managed the Centre consortium, which was founded by Circle and includes Coinbase as a member. Circle held around $3.3 billion in Silicon Valley Bank, leading to a run on USDC which resulted in it trading for as little as $0.95 on some exchanges today (Mar 10, 2023). This represents around 30% of USDC's cash reserves and 7% of its total reserves. The balance of reserves are held in T-Bills, which are liquid an…

There's something deeply ironic about a flight to safety in the form of Tether , which has famously been described as being "quilted out of red flags". But if you can't redeem it and it's not backed by anything remotely approaching normal assets, I guess you can't have a bank run on it either... until the music stops and the insiders propping it up run out of chairs.

Tether is pretty much being propped up by thoughts and prayers at this point

Re: Coinbase suspending USDC:USD conversions over the weekend

#80

Post by vasco »

loveparade wrote: post #35
re-thc wrote: post #29

Earlier quoted context omitted.

Can't you just buy USD directly? How does that help? What does the C part of it do?

No, in many countries you cannot buy USD directly. You also cannot store USD in a local bank account. And in various places it's explicitly forbidden to hold USD as savings because it would devalue local currency if everyone started transacting in USD instead. So, the "C" makes USD exposure available to anyone worldwide, assuming you have e.g. an Ethereum wallet.

So you are saying that there are countries where USDC is legal while opening a foreign brokerage account like IBKR and converting your currency to USD is illegal? And this is not just a perceived loophole? Could you give an example of a country like this so I could google?
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