Bitcoin Forum

A stable coin is any cryptocurrency pegged to a stable asset, such as gold or fiat currencies. In theory, a stablecoin will remain constant in price, as it is a representation of a known amount of an asset.

My question is: Does a stable coin have a set total coin supply? Or does it have to be able to create and destroy based on the demand?

The image in my head goes like this:
A stable coin pegged to a currency started off its business saying it would have a coin supply of $5 billion. Everything works well until one day, the crypto market goes south and everyone rush to buy the stable coin. The coin is unable to sell to everyone because the demand for the coin is too high, so some people are left out.

Please correct me my misconception :D

Most stable coins have a variable demand as is the case with coins like Tether. The price can fluctuate in times of high or low demand but a very small amount because people know they're losing out if they trade in such times.

In your example the expectation for the fall in the crypto market would have to exceed the loss they'll get for buying the stable coin at a higher price or selling it at a lower dollar price.

You are certainly not wrong with respect to the supply but since it is centralized and controlled, most times, stable coins supply can be increased at any point just to meet up with the demand which is one of the reasons USDT gets minted most times, though they claim it is tied to real fiat available in the projects bank account.
What I simply see is the fact that they always will have a way to work round it since like I said, they are mostly centralized. In the case where some people are left out, I want to assume it cannot be that bad that no one will find it hard to get even into fiat since most times, it is like an auction and will variably have to sell even at loss. Remember someone elses loss is someone elses gain. Someone should correct me if I am wrong as well though.

i think the stable coin always has fixed supply, so, the coin can't be created and destroyed based on the demand

I think you are misinformed about the stable coins because they will always out number themselves as compared to the other coins and they know it very well because they already know people will tend to buy it more and more as soon as the south direction of the market has started to rise up. I guess this is why they are unlimited in the number. Mostly the coins which are stable coin are made un such way that they will always fulfil the demand by having more supply emitted constantly over the time. So better check that twice, they produce more supply thats why they can keep the price stable even in the demand situation.

In the cryptomarket , if a stable coin is in high demand , the ratio is still the same ,of tgat demand is high and the supply of coin is very scarce then the price of this stable coin in the market will rose high because of its high demand, coins in high demand ,will have itscprice value elevated higher than ususl demand.

Stable coins sometime can be not-so-stable, we have already seen this phenomenon with Tether. Also, you can take a look at what's happened to Money Market funds in 08. 

I think the price of altcoin is in great demand, especially for us the prices of bitcoin and ethereum will also increase, so for them they will also find it easier to get a lot of profits.

There is a fix nunber of token in contract.
If the price of a coin is stable and suddenly have high demand from the people there will be shoetage due to holdings.
The price will rise even golds have this kind of nature.

Let's look at thether. When there are big corrections the demand for Tether is astrnomical, it has almost the same voulume as BTC on exchanges and it's supply can never end. Look how much Tether is being printed constantly. Most important thing is that it is back by a true US dollar.

Your question is pointless,because a coin with a stable price will never have high or increasing demand.
The price volatility and the possibility for the price to do up is what drives the market demand for a particular asset.I don't see any altcoins with a stable price.Tether is the only example,but I don't think that this is a real  
cryptocurrency.Tether is fake crypto. ;D

Many people will invest and trade.It will be very beneficial especially to those who are in the digital world.You can trade anytime.Many people will be intereated in investing  as well.

Well, I think it's very difficult to think of the stability of a coin that is meant. because basically they or investors will indeed invest in stable coins, but that doesn't mean the price won't increase. we say that gold is a stable investment, it's because the price is always rising, because of that, we say it's stable. but, I think people won't invest in things that are fixed. if a coin has a lot of demand in the future, I think it certainly will greatly affect the price.  :)

If a coin is stable but they have high demand they will quickly be invested by many investors and they will quickly get good prices and many exchanges will quickly accept them for trading on the floor.

Well, don't worry it will never happen in the crypto market because it is just a useless shit coin used for trading pairs only and if the demand increases there will be no changes in the price of its and also other coins.Honestly people are not interested in stable coins since we cannot make money with that.

I haven't gone to through the technical details of any stablecoin but I do not think they need to have limited supply...it is counterintuitive. No fiat has limited supply, I think? so why would stablecoins

Limited supply normally cause  something to increase in value. Or scarcity causes the price of something to increase.. which is why Bitcoin and most Cryptocurrencies have limited supply.

After reading all your replies, I still don't gain much understanding on how a stable coin functions. I'll lay out what I know below.

#1. A "stable" coin pegs its value to either a fiat currency, or precious metal like gold.
So that means it's price is not affected (or at least not affected much) by the market's demand?

#2. From my initial understanding + the replies so far: A stable coin can create and destroy based on the demand.

So, with those two assumption in mind...

When the demand is high:
A stable coin buys fiat currency/metals to hold. By doing so, it will have more value than before. With the increase in value, it can creates more coins, up to a point where each coin will have the same value as the fiat/metal it is pegged to.

Did I get it wrong?


Another thing I noticed from the replies is that some are sceptical of a coin whose value doesn't change. "How will you profit from it?"
From my understanding so far, people will use a stable coin to "store their investment's worth" when the market is not going the way they want it.

Tether is just a token that is printed according to demand. Since it has parity with the dollar, in theory, it is very difficult to have an inflationary power. But it should be regarded as a temporary solution. Who has stability is the dollar. So if it's in too much demand, just print more. Today it is already one of the tokens with the largest marketcap.

The collateral of the tether is supposedly a bank account in Costa Rica with many dollars.

Some others like the DAI have a complex system of weights and stabilizers to always have the same value of 1 dollar. You can read more here as it is a very complex subject.
https://medium.com/cryptolinks/maker-for-dummies-a-plain-english-explanation-of-the-dai-stablecoin-e4481d79b90

Till the moment i have seen only one stable coin in market and that is USDT. It is a representation of know fiat USD, its price follows constantly the fiat value.
The demand of this coin seems quite well, even price is not expected to rise 2x but if you are looking for a stable coin then USDT is the same coin

Wrong, a stable coin should have an uncapped supply so the issuer can pour more on the market in times of high demand to be sure that the price of the coin is the same as the price to the asset its backing. In periods of low demand the issuer should be buying the coin themselves for the same reason.

If a stable coin demand rise then the value and price will automatically rise and in this way it will get much attention in the market while to hold this kind of coin is a good way to sell at high price.

In my opinion, stable coin like USDT if always printed because peoples demand, its will increase others coin price. Supply on USDT increasing but supply on bitcoin or others coin not change

simply applies the law of supply and demand, if a coin has a limited supply but the demand is high, it tends to increase in price, therefore not stable, if a coin has low demand, means it has plenty of supplies in the market, means no one is buying it, therefore unstable too, a stable coin has plenty of supplies and the demand is also high, volatility is the major issue here, the fast paced trading due to high demand and also growing supplies because of mining and panic selling on the market are the culprit.  

I don't know how we can call bitcoin a decentralized coin when we can just print out tether like crazy and buy bitcoins or whatever we want with it and than call it different than regular bank controlled dollar or euro ?

I mean if we can just print tether whenever we want, than we can simply just print out 100 trillion tether today and buy as many bitcoin as we can and spike the price of bitcoin to insane amounts and than call bitcoin successful, that doesn't make us any different than 2008 banking crisis where they print out 800 billion dollars. We should try to limit stable coins and their owners trying to adjust the price by hand, people should be doing that themselves looking at the value of it, not the other way around.

Well its true that stable coins seems like a gateway to wait the market dip and then buy again. But i do think it doesnt matter and not affecting the price so much. Doesnt mean people would just leave and doesnt mean all people will follow to dump their coins. I believe  there is a buyer and there is do a new people enter crypto everytime the price going down so i dont agree with your theory and its too hard to have a proof about that.

I am of the opinion that if the demand is high and it is rising the coin can not remain stable.  There are traders who are watching all entire market.  Immediately they will attack that place and drive the market and its price for their benefit.
So if the demand is high naturally it means as a result the price will move upward.

I absolutely agree with you. Decentralized crypto currency can not have a stable price due to its high volatility by nature. Now they are trying to create tokens linked to gold (ICO Jinni project), others are to diamonds, but so far it is unclear what will come of it. Meanwhile, I do not believe in a stable currency.

Since you guys agree let me ask you this. A coin has a stable price due to it having limited supply and being widely accepted. Think Bitcoin in 20 years. I believe that if it continues to exist 20 years from now it will be relatively stable. Suddenly a war begins, wouldn't it surge? Same thing is happening with som many stable fiat currencies that become unstable once the shit hits the fan.
So yea, iI believe that a stable coin can suddenly go into a crazy rally. The question is pointless though. If there's a sudden high demand a stable coin becomes unstable, that's it.

This one, in Bold. Stable coins have to be created and destroyed when you buy and sell them. As far as I know there is no such coin but this version almost seems like a dream. Imagine you want to get rid of any unwanted actions from bank and keep your funds secure in virtual world, buy and sell without trace and keep anonymity, imagine second Monero with fixed price and changeable demand.

Any coin or stable coins in the market which are currently in demand would really take the high price value of that stable coin, and much more it will rise up if the supply in the market is fewer in quantity, if the volume is more of quantity still it get a higher price because of a certain demand of that coin.

It should not be going with the flow of the crypto market.
Nothing can be stable when it is leaning at it.

Independence. It should make its own price.
5 billion coins is in your example and I think that should be enough if the price per coin will be higher before it stabilize.

The problem with a stable coin is that there has to be a bank or reserve of the asset the coin is pegged to so that people can redeem the coin for the asset. The ability to redeem it for a set value of the other asset is what gives the coin a stable value. If some coin has a $5 billion valuation backed by dollars, there has to be $5 billion dollars in reserve to exchange for anyone who wants to trade out. The first problem is amassing the enough of the asset to peg the coin to it. Also, pegging the coin to dollars should theoretically limit the upside of buying the coin, even if demand spikes, because the most you are guaranteed to get out of owning the coin is the same amount of dollars in the pegged value, so it's it entirely seems pointless to try and trade a pegged coin for profit.

A stable coin can still move a little bit when it comes to its price since it will be affected by the demand. but since its pegged to another currency, like the dollar in the case of tether, the variations in the price are going to be a lot lower, the only time when I saw the price of tether being very low was when there were a lot of rumors about that not every single tether is backed by a dollar.

That wouldnt be a stable coin anymore lol. If the demand rises on the stable coin there should be more supply to maintain stability, if there is less demand then the issuer has the duty to buy every coin that is dumped.

This is very far from the nature of bitcoin and the nature of the crypto currency, but if we want to just dream a little about a high demand with values ​​that can only be said to be straightforward, then bitcoin will have less popularity, because what? investors expect a higher price, because the increase will not occur, investors will look for other alternatives to become investment assets

I don't think the stable coin is ever present in a crypto market, unless it didn't enter any exchanges which impossible since how can it get high demand. It may vary on caps and how the team will handled it.

There won't be a stable coin if the supply of the coin is limited, there's always supply and demand factor that will keep the price moving according the current trend. The only possibilities of a stable coin is a coin with unlimited supply and the creator can create as much coin as they want to fulfil the demand and to destroy some of the coin if there's too much circulating coin, and that's called fiat.

any currency today is the result of supply and demand, just many have reached such a large volume that they are difficult to move off course. therefore, it seems such a currency is stable.

I think there would be a possible scarcity of that coin. In my own perspective, Bitcoin were very effective nowadays since tge price were fluctuating everytime a possible growth of demand comes in our way and we should value that kind of system, if Bitcoin was fixed into certain amount, I think it was non-existant these days.

;D apparently, he does not have a single clue what a stable coin is in the first place. It is normal for demand of a stable coin to rise, but since it is regulated and tied with something, the supply is usually not capped. USDT presently, ends up minting more of it once in a while to be able to meet up with the demand and be able to control its price tag to $1 as the case may be. There could still be some little movement, but all the same, it is never some serious one worth selling at high price like jhony said.

In cryptocurrency stable coins that are high in demand ,can create, scarcity of supply in the market and in turn the price of this stable coin in the market will rise up ,because of its great demand from the customers .

For what it is worth, at least, USDT crew claimed USDT is backed by real dollar in the bank. We do not know how true this is, but recently, some issues were raised that brought about questioning how USDT team operates. The supply for a stable coin is definitely going to be uncapped, which is still something relative to normal fiat, just to be able to meet up with the demand and if truly it is backed by real amount of dollar in the real world, I guess that makes it more like a real tether.

Of course fiat has a total supply according to the needs of the country, because if the supply is not limited it will cause an increase in the price of goods and a decrease in the value of the currency, the amount of money in circulation will cause prices to adjust up, so that money becomes less valuable and more worthless because the amount is too much, or commonly referred to as inflation.

According to coinmarketcap stablecoins do have a total supply remember that maximum supply is not the total supply.  Looking at their marketcap it gradually increases over time in this case no one will be left out. We know that tether has the ability to create more usdt out of thin air they have a past history of doing so and I don't think that's going to stop anytime soon.

Although people aren't interested in stablecoins like tether the daily trading volume remains to be high regardless.

When the demand for a stable currency is high, the supply will of course be short but the price will also go up as a result of which the factor of profitability will be more visible.

This implies that the term stability is solely responsible for the market value and status of a coin and this is something that is of prime importance to investors around the world. So there are great chances of earning good money when the stable coins are in high demand.

Asset backed Crypto currencies is a very bad idea, because it voids the advantage of having a fixed supply of coins. Let's take Gold for instance, because new large Gold deposits are found almost every year and the price of Gold and other precious metals are being manipulated by large cartels and also some governments.  >:(

It might be stable, but it is still being manipulated and that is where the problems starts. Bitcoin's price is linked to a fixed supply from the Bitcoin protocol and also what bitcoins are being circulated on the markets. It is not linked to some asset with a variable supply, like Gold and Silver.

What will happen with the price of these asset backed currencies, when astronauts figure out how to bring back massive amounts of Gold from some of the asteroids where large Gold deposits were found? 

As far as I know and understand from the market cap price, the coin will unstable the price if have fewer of the demand on the market and it becomes high in supply which is not good, so, therefore there is no stable coin price in the market that having a high demand. Most likely those coins are manipulating by someone else. That's the reason why new token/coins having an exact circulating supply to make fluctuated demand and make unstable price movement.

It really depends on what mechanism they are using to moderating the stability of their coin.

Different systems can have completely different and contrasting mechanisms of doing so. For example, stable tokens on the BTS network work completely differently to Tether. So there is really no one single answer to your question.

And generally, if the stable coin is decentralised in moderating its volatility, the process takes some time to reflect. So when demand is high, prices will still go up on the market. If you want to see an example of this, go look at the SBD charts.

There will be no coin that could be stable since it is being traded daily without stop. It is not like FIAT that could really be determined by in a constant way.

I think that your misconception stems from the fact that you think stablecoins can't be traded on the open market - they can, and they are still affected by demand and supply. There is a central distributor in the case of something like the Tether system, but they don't handle all the transactions that happens out of their site.

There are going to be people more than happy to sell their stable coin for above pegged prices, if the stable coin gets extra demand like that.

Your question about the supply varies depending on the method of pegging, whether or not there is a central entity manipulating the supply or not. And if there is no other way of entering the market in a period of high demand (i.e. buying from a central distributor for the pegged rate), other than on the free market, then prices will go up until the peg is corrected centrally or until demand lessens.

Should a stable coin become so in demand, I would say it would be gigh valued. The prices are connected to demands and because it has a limited supply it is for certain  that the value will go up very high. Even if a coin is backed by a real currency that is stable, it will still go volatile with the demands for it. There will always be changes with its value because this is how the cryptocurrenxy works.

if you need crypto coin which is directly connected with fiat then tether (USDT) has done. Each USDT unit is supported by U.S. Dollars are stored in Tether Limited and may be redeemed through the Tether Platform