Bitcoin Forum

Stablecoin price becomes unstable due to Bitcoin’s price fluctuations
http://bit.ly/200319_EN

It seems that stablecoin (substitute for the US dollar in the crypto market) prices become unstable during huge Bitcoin price fluctuations.

According to crypto disclosure platform Xangle, there were 58 cases confirmed since 2015 when the stablecoin USDT’s prices fluctuated by a maximum of $0.05 within 24 hours. Out of the 58 cases, there were 17 cases where Bitcoin prices fluctuated by more than 10% and 36 cases when Bitcoin prices fluctuated by more than 5%.

This is allegedly because some exchanges do not allow the withdrawal of fiat currencies; hence the only way for investors to cash out Bitcoin is by buying stablecoin. On the other hand, investors might have preferred USDT over fiat when Bitcoin’s price was undervalued, resulting in an overdemand of USDT.

The price of a stablecoin is determined by the price which trader pays for buying it and they aren't related to the algorithm for which Tether or similar stablecoins were created. Whenever there is a huge drop or huge pump there would be significant rise and down in the Tether and other stablecoins prices. This is due to the fact traders are selling their btc and buying up chunks of stablecoins. With the supply and demand criteria this tends to create a demand for the coin and the highest bidder will receive the coins. Similar situation happens during the price pump of famous crypto as well. When people are willing to buy bitcoin on large amounts which is resulting in a pump there we would be seeing a sell off of stablecoins.

Stablecoins are designed to stay in $1 but if they are subjected to severe market crashes or pumps the price of stablecoins like Tether oscillates to meet the criteria and demand. This is how the supply and demand algorithm for almost all the fiat currencies work in real world. If the economy of a country is sliding downwards there would be a dump in the national currency while pegging it to USD and vice versa during the economy of the country is increasing.

Well I do think that it is because of high buying and selling , the trading is very high , since the banks are shut down and people are in a big problem , they are using cryptocurrencies and using them means volatile buying , selling , trading , using exchange pairs , so even if the price is getting up and down I do think it would be normal for a time like this.
Even normal currencies are crashing and banks are trying hard to maintain their value .
Therefore is people are thinking of encashing temporarily against stable coins and using it , it ofcourse would cause the price to jump around.

This observation is pretty normal @OP and this is mainly because of the huge panic in the crypto industry due to the spread of COVID 19. Many enthusiasts are selling off their bitcoins to hold the USDT and other stable coins so that at least they don't lose value in what they have accumulated at the moment. Once prices start rising I am sure the stabel coins will be back to its pegged value against the USD

Nevertheless, this is not very big volatility. Even in comparison with fiat money, this is quite normal. I don’t think it’s worth worrying much about this.

I thought they were supposed to go up, cointelegraph posted an article that Stablecoins went up after the huge price plunge in the Cryptocurrency market.
Maybe your article is the latest, probably the Stablecoins decreased in value due to stock market crashing like crazy and people are panicking and started to invest in BTC.

The instability of stablecoin is usually negligible except in an extreme case, ordinarily it shouldn't go below $1, there are times it has dumped to $0.98-$0.99. They are usually backed by asset and have an algorithm to maintain the price. However one should avoid risky stable coins that  prices to moon and stay stable during a bad market situation. For safety, I usually will use USDT, and recently BUSD, and I don't stay long on them.

Don't make shortened URL links, they're not welcomed here. If you're talking about Tether, then I don't see it becoming unstable yet. It's always around $1 whatever happens, and that's the point of it. I mean the lowest it got during this bearish trend is down to $0.96, whereas Bitcoin went from almost $10k to less than $5k, so I don't think that the comparison makes sense here. Tether is centralized and risky because it might explode anytime, but nobody knows when it's going to. But since it's directly under control, just like fiat, it does not get affected by what happens to the market of decentralized currencies.

it is not a new thing for traders, specially the altcoin traders to pull out their money from the market as the market keeps on declining. they may initially dump for tether but eventually they won't want to remain in that altcoin because it is still very risky. it has happened many times in the past and this current situation is not even the biggest one. we have had bigger tether price crashes in the past specially during the time when bitfinex was hacked and again when banks closed their accounts.
at the end of the day USDT is still a centralized altcoin with a huge risk.

I was really shocked to see usdt going down but all same I knew it's from market situation but everything regarding market will be normal once we see positive treatment towards Coronavirus. This virus really spoilt a lot of things. Let's anticipate proper returns soon.

n my opinion, it's reasonable if the price is determined by bitcoin, because the price of bitcoin must go down as well as everything, because the market sees the ups and downs of the price of bitcoin, and other crypto will definitely follow.

That's true and im even still holding all of my stable coins even the whole of crypto market has already started to get a big recovery again. There was no huge gap between it and i think that i should not feel worried about that. After i have checked it recently and i can say there was no even a huge volatility around the stable coin.

It makes sense to some to move to stable coin in this kind of situation. After all you wanted to protect your assets specially when the market crashes. So obviously, BTC is the gold standard, and thats ironic to see stable coin became 'unstable'.

So there's no safe assets right now, every coin is volatile because of the covid-19 effect, so just be wise, if you wanted to hedge against stable coin, then good, but you should know how to get out in time.

You, therefore, can't expect stablecoins could be stable at all times because in the first place it is not the feature when it comes into the crypto market.
We can't blame because of Bitcoin price fluctuation but it is because of crypto volatility bring the entire market freely to move up and down. This all a usual thing to see around and ain't surprise us anymore.

The best solution is to use common sense and buy the fiat instead of stable coins. Crypto market fluctuations have been here for a long time and I doubt the stable coin is the answer to the questions mentioned here. You guys should make a research about the USDT(Tether) which price has dropped to $0.8 after the many investigations by regulators.

I have heard that the value of other currencies fell so it's also possible with stable coins. If you guys are not comfortable of converting your bitcoins into stable coin, simply use the fiat structure or pair.

This will lessen your worry if you are seeing stable coins are no longer viable for the conversion. But, I won't use any stable coin because I've seen someone told it before that it has lost that much value until it die but I'm not generalizing the popular ones.

Supposedly all stablecoins should not crash at any point as they are tied to particular fiat currency. However, it will follow the price movement of that fiat currency. Unless that fiat really crashed hard also. If the stable coin is crashing whereas its counterpart fiat is not. Then, it is not doing its job being the stable coin. Maybe, you have to think twice on investing that stable coin if it's not doing the supposedly price stability.

0.05$ lose from stable coins ain't lose to me, what will 0.05$ do? Sometimes usdt goes under 1$ but not all stable coins, some are more stable than the other like DAI and USDC now, one fluctuates more than the other but they still maintain the stability

I still don't believe about stable coin because all coin have different pairs and the major trend is btc, all day volatility happen and make value and volume changed. In forex we also know USD is major pairs but can give impact into all currency, same story with bitcoin. Volatility need to create position and with out that market will abandon, stable is unlucky position and situation.

Yes, this is certainly quite normal, because the name stablecoin will obviously follow the value of paper money, because the stablecoin was born so that everyone can measure their crypto assets and their real assets, so the name stablecoin price remains stable, although there is a slight increase and falling prices when in the market.

Right.

And most stable coins follow the trend of US dollar so if the currency itself starts to fall then you should expect the value of it will drop too. It's attached to the value of dollar so basically it's own value will have its own share and will share the same effect whatever happens to dollar.

Same goes for other kind of stable coins attached to Euro or Cny.

The volatility of stable coins is very low. Quite rarely, stable coins decently decide in price from the exchange rate of those currencies with which they are provided. For me, this is practically irrelevant, since stable coins very quickly return to their original price positions. In general, stable coins perform their functions well.

Stablecoins aren't 100% stable in prices and fluctuations are ordinary parts of crypto industry. We must deal with it.

When cryptocurrency market price fluctuates too much, peoples will convert their coins into stable coin like usdt to secure the value.
This will causing stable coins demand increasing and the value of stable coins may increase a little.
But it is better to buying stable coins with price higher a bit than lose the money due dropping price.