Investing / Stablecoins. More or less risky than cryptos like Bitcoin?
Oct 13, 2021
Stablecoins. More or less risky than cryptos like Bitcoin?
I don't know much here but read a fantastic article done by a reporter 'investigating Tether, one of the standards as far as stablecoins are concerned. The reporter did his due diligence trying to understand where Tether's reserves were held and it just got me wondering if stablecoins, which are collateralized by real assets and real currency like the US dollar, are actually more risky than a 'mainstream' crypto like Bitcoin? Does anyone care to explain or know this? The article in question: https://www.bloomberg.com/news/articles/2021-10-07/can-you-trust-stablecoin-tether-5-takeaways-from-bw-s-cover-story
Replies (5)
Oct 13, 2021
I don't think there is a clear answer for this. Even though you would expect that these coins would be more "stable" because they run on blockchains tied to the value of fiat currencies like the US dollar or metals like gold and silver, I don't think any of them are actually regulated like fiat currencies (via the various federal agencies) or commodities (CFTC). Without that regulation, "stable" is just a word and some of these coins even fall below the value of the currency or commodity to which they are supposedly tied to. It's really still the wild wild west with stablecoins.
Oct 13, 2021
@Nathan646 That makes sense. Why would anyone buy stablecoins? What's the point?
Oct 13, 2021
Usually crypto traders who want to go in and out of different cryptos on a crypto exchange use stablecoins. By doing that you don't have to pay the high fees to cash out. I think of them like a "cash transaction" as it's a way to still hold on to cryptos on the exchange but without the huge volatility that comes with crypto investments
Oct 18, 2021
Not less risky that's for sure. Tether was recently fined $41 million for making false statements about how much they actually had in reserves. They are the largest stable coin by market cap btw. https://markets.businessinsider.com/news/currencies/tether-cftc-41-million-misleading-statements-stablecoin-fiat-currency-backing-2021-10
Oct 18, 2021
This may help too as it was covered in The Gist a few days ago: ☝️The point of stablecoins.