Bitcoin Forum

If a stable coin does not have an 1:1 all-cash reserve, do you think this means it fails to keep its value on par with USD?

As the media questions whether Tether has enough USD reserve to support its value in the recent USDT/Bitfinex drama, I found a data analysis of fiat currencies pegged to USD and comparison to stable coins.

https://medium.com/sophonexchange/stable-currencies-fiat-vs-crypto-a2ab0a50e903?source=friends_link&sk=f34d3104f7c3ca7bbe91ae508f556e56

Fiat. (Not saying I like Fiat more)

Even the Crypto stable coins aren't stable, look at something like Dai, Tether, etc -- which has been fluctuating between a couple of percent of their peg for some time. I think that if the USD falls, Bitcoin is going to have to go with it -- because at that point we're going through some sort of insane crisis that may take a LONG time to recover from.

The price of fiat might looks stable but it is not and it never will be.

The price of fiat just keep decreasing year by year due to inflation but the value of crypto changes in the pattern of change in demand for that coin.

This'll be a big topic of debate. Recently I saw a video from Tim Draper saying virtual currencies are not the volatile assets - fiat is. It is because of geopolitical decisions/events, turmoil in certain countries, etc, that the price jumps. Although to me it's just the nature of the market (and how easily manipulated it is) with its 'base' being the EUR or USD.

This is what I call a tricky question and each one here will have a different opinion on this, it’ll be interesting to see if we all can find a consensus on this op add a poll for this. In my opinion both are not stable, and one should allocate funds to both though I’ll suggest to hodl more of crypto’s than fiat for the risk takers.

It is a really good analysis and we all know that Tether is not transparent with their finances and they will fall when their lies fall apart, Tether always claimed that they had 1:1 US dollar cash reserve even when they printed billions during 2017 and there were many threads here questioning their reserve claim and now they revealed that they allow other assets too as reserve, not sure about the rest of the stable coins. If there is any stable coin that have transparent audit data, i will convert my coin in them and not in Tether.

The right thing would be that the correlation between fiat and a stablecoin were equally stable. If the stablecoin is more volatile than fiat, it means the stablecoin doesn't fulfil its objective. Tether has already failed, as it was discovered it wasn't backed by a 1:1 proportion, but a 0,74:1 proportion.
But there are other stablecoins that can still work, although I think it's not necessary to have many of them. We just need one of them working properly.

Volatility is one significant association with the world of cryptocurrency. This is evident even with the stable coins like tether. In reality, cash is more stable than crypto and  I don't think anybody who has experienced both worlds, would argue about this.

Most of the people don't know that fiat even don't have stable value so they might argue that crypto is not stable and fiat is more stable.

But when we try to see from the technical view and i have no reason to call fiat as something that can be valued. It's caused by the fiat created by the government and we will be back again to the fiat definition when
https://www.investopedia.com/terms/f/fiatmoney.asp


Where the government can make it stable? based on the demand and supply? crypto is even doing it.

But governments are printing more and more money every year which makes the demand less as well as the value so why we need to trust something not backed up anything and also losing the value year by year.

1:1 reserved with what? With USD?
Fiat is stable but it would not be for so long. Its value has an amazing volatility especially when economic events happen and in most of the cases this events are bad and not positive ones.

Define stable? In the short term meaning days, weeks and months of course all major fiat currencies are more stable. What crypto is doing is providing an alternative means of sending, spending and storing value. Crypto can only work well provided that there are stable societies that permit it politically: meaning that miners and users of crypto are not hunted down as enemies of the state and secondly that there is a stable electric and internet grid.

Come anarchy, come the zombie apocalypse neither fiat nor crypto would have value. In fact fiat would have a LOT more value. It could, once again be considered a means of exchange as it would be relatively scarce and could no longer be recreated. Not to mention, that at worse, it could be used in fires. Crypto? Without electricity and the internet crypto doesn't exist.

Your analysis of fiat conflates Cash with all fiat; and may actually be backwards.

Without electricity, Crypto safely resides in various blockchains and wallets. Fiat, the largest fraction of which resides in electronic ledgers, may be forever lost.

Neither crypto, or fiat, is dependent on the Internet. The messages by which transactions are sent to miners are not Internet based. And for Fiat, pretty much the same is true.

The stability of Stablecoins doesn't mean flat stability.
Gold-backed Stablecoins will fluctuate according with the fluctuation of the gold price.
They are stable in that their volatility is manageable, while the actual volatility of Bitcoin prevent it from being a store of value and means of value transfer.

Further, they are stable in that they save the purchasing power of their owner.
A gold-backed stablecoin is more stable of a $-backed stablecoin, even if its price fluctuate more than the price of the $-backed stablecoin, when compared to the $.
The reason for that is that gold save the purchasing power of its owner more that the $

Hmm. Good point. I did conflate cash with fiat. They are absolutely not the same.

And you're correct Crypto will still exist, but in a very crippled form. I would not consider to be useful in the zombie apocalypse. Although it would be potentially be useful after we rise up out of the ashes.

The government can't print it anytime. A lot of things must be consider before the government tried to issued a new fiat money and distributed it to the public. Fiat gains it value from the trust by the users but the economic condition of the country become the main thing to determine the time to create a new fiat money or not. When government always printing it anytime and that means inflation.

What do you mean looks stable?never the price of fiat becomes stable and we can see that on forex exchange that the value is moving every hour
Where did you get that idea that Fiat price is decreasing year by year?lol never that this happen,yeah maybe there is a consecutive dropping about the value but not constantly since the economy of each countries that represented those fiat changes and some grows while some are not

We shouldn't generalize. There are fiat currencies that are or used to be much more volatile than Bitcoin and Bitcoin isn't really stable compared to stablecoins. Just take a look at some fiat currencies that went through the process of hyperinflation. Compare Bitcoin or stablecoins to the currency of Venezuela or Zimbabwe. But wait, there's more cases, much more. Greece during WW2, Poland after WW1 and later when communism was coming to an end in the 80s, China in the 40s...
These currencies weren't going through a cycle like Bitcoin with 500% increase in a year. No, they were going through a cycle of 10,000% decrease! If Bitcoin experienced a bubble like that you'd be able to live like a king for the rest of your life with just 1 coin. Calling bitcoin volatile is really unjust.

@ coolcoinz,
Your comparison with fiat currencies is flawed, because you consider the fiat currencies you mentioned, only while they were collapsing.
I wouldn't talk about volatility in that case

Compared to the major currencies since Bitcoin exists, Bitcoin is volatile.
For example, as far as I know, in this period it has been more volatile than any commodity.

There is no point in talking about stability if you don't define the term of comparison: stable compared to what?

It is the sun turning around the earth or the opposite?
It depends on the perspective.
From my point of view, the sun turns around the earth. I see it rising on the left and setting on the right.
From the point of view of another galaxy, it's the opposite.

If you take the $ as term of comparison and you compare all other currencies to the $, than the $ will be by definition stable, and all other currencies won't.
If you take the € as term of comparison and you compare all other currencies to the €, that the € etc.
It's a matter of definition, and definitions can be arbitrary.

For example, they say gold is volatile.
When they say that, they are comparing gold to $.
But they say also, in the last century, since the FED exists, the $ has lost 98% of his value compared to gold.

So, which one is more volatile?
Gold or the $?

It's a fake question.
Something is volatile or not, depending on which perspective you choose.

When we talk about currencies, the term of comparison shouldn't be another currency but purchasing power.
Gold is less volatile than the $ because it saves the purchasing power of its owner.

1g of Gold in 1900 could buy the same goods as 1g of gold can buy today.
No volatility
1 $ in 1900 could fill the shopping cart.
High volatility

The same principle is true with shorter time periods. I used long time periods (1 century) to make the point clearer

You may not like it, but what is unreal and unrealistic is any A to B comparison. It's necessary to compare one to all and all to one.

Fiat because controlled by the government or big banks. unlike crypto no ones control can run freely. Fiaat can print the more they want unlike crypto processing digital decentralized.

Fiat is stable because money will use all over the world and will never be obsolete but crypto or bitcoin will be dies if a technologies will run forever.but what if will happens that suddenly shutdown all kinds of electronics gadget all over the world? If ever this will happen how will you still use crypto?this is just my opinion if ever happens this?
although I know also this never gonna happen because we are in new generation and smart people developing a new high tech technologies that we never expect because they always discover an unbelievable things like developing technologies.Like crypto,who will knows that this kind of crypto has been done.

I know crypto is stable but there a chance to lost of power electricity that chances also to stop crypto unlike fiat we know that this will never ever be obsolete.thats why fiat will be stable forever.

Here's the problem. All fiat currencies will collapse at some point and history shows that most of them need less than 50 years for it to happen. Some countries already went through hyperinflation and that includes some giants of the economy like USA and Germany. What makes you think any modern fiat currency will survive until the end of the century? Also, it might have been more volatile than commodities, but commodities are not currencies. It's a fiat vs crypto thread.

If somebody developed an altcoin backed by horses, we really might get a stable currency.

 :D

I am a crypto ethusiasm and I am the one believes crypto have future as new form of money that can make help for the economic growth in the near future, but we need to accept fiat is very stable because they control by the world government how it works, therefore we need to support crypto currency to become stable coin un the future because I believe crypto improves itself if the new technology continue to progress.

Bitcoin went up, like, $600 over the weekend... Forex time. Or did the $dollar go down?

8)

@coolcoinz,
I don't know where you read me suggesting that fiat currencies will survive until the end of the century.
Try to read my messages and you will see that nowhere I suggested something link that.

Commodities can become currencies if they are put on the blockchain, so to speak, i.e. if they are used to back cryptos.
In fact, something like that exists already. They call them x-backed Stablecoins, where x is a commodity.

Certain commodities were currencies, for example gold. They called it Gold Standard and it worked well until the Central Banks took control of the financial system and imposed their fake money.
Gold can be a currency again as a gold-backed Stablecoin.

Commodity-backed Stablecoins are cryptos, I guess, that's why we can talk about them in a fiat vs. crypto thread.

I think in future we may not need fiats currency because blockchain and bitcoin has opened our eyes on how we can transact online without needing banks and the centralized financial system we have. This new cryptocurrency system enables us to transfer value without legal implications that we do face in our days today business. To me we would not need fiat if bitcoin becomes fully functional and adopt by government as money.

It seems we didn't understand each other. You said that I'm considering fiat currencies at the point of collapse, my response was that they all have a point of collapse as they all had it in the past. If we compare it to bitcoin we'll see that many of them went through hyperinflation and died in less than 10 years from being released, which makes them much more volatile in general terms.

Even if a commodity becomes a currency it still won't be fiat currency. In your own words, a commodity backed stablecoin is a cryptocurrency (which is something the community has yet to agree on), but if we talk about them here what are we going to compare them to in a crypto vs fiat thread? They aren't very volatile, so in these terms cryptos score even better.

Anyway, like you said it's a tricky question. As a fiat hater I took the obvious stance. The stability of fiat is fake, superficial, like that house that looks good on the outside but is ready to collapse and when it happens it's going to be quick and sudden.

Ok.
We agree about fiat currency collapsing some day.
We disagree about which period we have to look at in order to consider the volatility of fiat currency: you look at the collapsing-period, I look at the normal-period.



You are right.
It is not clear what cryptocurrencies means.
There are those who don't think commodities-backed Stablecoins should be considered cryptocurrencies.
There are those who don't even think that Stablecoins altogether should be considered cryptocurrencies.
For me, cryptocurrencies are currencies (means of payment) that use blockchain, blockchain-based currencies.

"They aren't very volatile, so in these terms cryptos score even better."
EXACTLY!!!  :)
That's the point!

"Fiat VS. Crypto, which is a more stable currency?"
As far as volatility is concerned... Cryptos!
Just use some commodity and back them up.
We don't need to look at collapsing scenarios, even in normal times cryptos are more stable than fiat.
Do you want to make cryptos win vs. fake money?
Back them up with gold.
Problem solved.
Cryptos win.
:)



I 100% agree.
The stability of fiat is fake.
People believe that fiat is stable because of those manipulated statistics about inflation rates.
This is fiat's true stability

http://static.seekingalpha.com/uploads/2007/9/12/inflation_large_en.gif

Crypto would be the most useful thing rising out of the ashes of a zombie apocalypse. Or whatever.

That is because you can do business with it; when the banks and credit cards are down. All that is required is the ability to check numbers against the blockchain, and business and commerce start again.

I agree with you that crypto is not a stable currency Its price has always come down But Fiat is stable We can't keep crypto stable even if we want to depending on the market prices go up and down.

Fiat is more stable than crypto.

Because fiat value stays the same while crypto depends on the demand of the coin.
If the crypto does not have enough demand then it would be considered worthless soon.

Stable coins should have a real value pegged to them (real assets) to make them stable.
Then nobody would buy/sell them for a price which is too high or too low.
The price of unbacked cryptocurrencies will always be unstable, because the believe in their value is constantly changing and AI bots are manipulating the prices.

Here is the one basic thing that makes fiat more stable than crypto. Fiat is used, worldwide, for standard things and operations of life. Crypto is slightly used like this, but is used for investment, more.

What is the one thing that keeps crypto from being used for the standard things and operations il life... like grocery stores accepting crypto. In the USA, it's taxation, and some SEC regulations.

The main way around taxation and SEC regs is to form Private Membership Associations, and to state such right in the formation of the PMAs. Of course, anybody can sue anybody. So, the IRS and the SEC will sue if they feel they are losing control. So, along with the PMA, you and your attorney will need knowledge of the 70 major Supreme Court cases that tell everybody that government is required to stay out of affairs that are private.

Google and Youtube search on "Private Membership Associations."

8)

Imho, people are summoned to fiat currency, but cryptocurrency slowly gaining respect

While crypto gains confidence it is usually a volatile currency not a crypto stable currency The crypto market cannot always provide accurate information by emerging names when prices will rise and fall. However  the spread of Fiat's stable crypto's honey  Although not a stable currency the demand for crypto is high worldwide The crypto market in the front will improve further.

I accept as true with you that crypto isn't a stable currency. Fiat stable currency. With blockchain  the crypto market is straightforward to affect and therefore the market whales determine its price, therefore the crypto market isn't always in one place.