Are stable coins solving the problem of providing stability to our funds?

[Rose_btc]

The market is dumping currently, and all of us are trying to save our funds, one of the best ways to not get REKT is to convert your cryptocurrencies into the stable coins.

This post is a brief about stable coins - A stablecoin is a new class of cryptocurrencies that attempts to offer price stability and are backed by a reserve asset. Stablecoins have gained traction as they attempt to offer the best of both world’s—the instant processing and security or privacy of payments of cryptocurrencies, and the volatility-free stable valuations of fiat currencies.

This information might be a common knowledge for many of you, where you are using stable coins for trading everyday. But I am assuming a good no. of people do not know about the basics, technical and lacks the core information about them.

• USDT - Tether (USDT) is a cryptocurrency with a value mint to mirror the value of the U.S. dollar. The idea was to create a stable cryptocurrency that can be used like digital dollars, but on 14 March 2019 changed the backing to include loans to affiliate companies.
  There has been a lot of controversy around USDT, which is they claimed to have got their security audit done, tether claims that it intends to hold all United States dollars in reserve so that it can meet customer withdrawals upon demand, though it was unable to meet all withdrawal requests in 2017.  Tether purports to make reserve account holdings transparent via external audit; however, no such audits exist. In January 2018 Tether announced that they no longer had a relationship with their auditor. The value of USDT as the say is not stable, and it keep varying. You can see the following charts for that -
  
  
  
• USDC - USD Coin (USDC) is a type of cryptocurrency that is referred to as a stablecoin. You can always redeem 1 USD Coin for US$1.00, giving it a stable price. Each USDC is backed by one US dollar, which is held in a bank account.
  
  Price of USDC Coin -
  
  
  
• PAX Token - The PAX token aims to solve the stability issue by being linked to one of the oldest, most stable and well understood assets around: property. The purpose of having the value, stability and security of tangible assets behind the PAX token is to instill confidence and help counter the volatility seen in other cryptocurrencies.
  
  Price of PAX Coin -
  
  
  
  
• DAI - Single Collateral DAI(SAI) and Multi-Collateral DAI(DAI)
  
  If you see the charts DAI is one of the most stable coins present -
  
  
  
  You can convert your Bitcoins to DAI using CoinSwitch Exchange - https://coinswitch.co/coins/bitcoin/bitcoin-to-dai
  
  

[killat]

Definitely, stable coins can be the key for the periods when market dumps badly. When the volatility is strong it is highly recommended to temporary switch some of your funds into stable coins until a trend confirmation.

Stable coins are also very useful when trying to multiply your funds via trading.

[Bttzed03]

"Are stable coins solving the problem of providing stability to our funds? "
That's what they are aiming for or at least that's how they are being promoted.

But little do we know, there's more to stable coins...
You might want to read this thread as well Are you currently holding stablecoins(USDT, TUSD, etc)? Think again.

[Deathwing]

No, they may seem to appear "friendly" but in the longterm you'll never know what will happen to USDT for example, the company holding the funds may go bankrupt, they might have administrative issues and many other potential factors that may cause a downfall. I don't really like it when people invest in "stable coins" and use it to trade. One day, people may wake up to USDT being worth absolutely nothing and there's no comeback.

[Rose_btc]

No, they may seem to appear "friendly" but in the longterm you'll never know what will happen to USDT for example, the company holding the funds may go bankrupt, they might have administrative issues and many other potential factors that may cause a downfall. I don't really like it when people invest in "stable coins" and use it to trade. One day, people may wake up to USDT being worth absolutely nothing and there's no comeback.

I completely agree with you, and whatever has happened in the past with USDT reserves, this all can fall down as a house of cards. Meanwhile what are your views with MakerDao, I think DAI is the only stable coin which is decentralised and stable in its true sense.

[Rose_btc]

"Are stable coins solving the problem of providing stability to our funds? "
That's what they are aiming for or at least that's how they are being promoted.

But little do we know, there's more to stable coins...
You might want to read this thread as well Are you currently holding stablecoins(USDT, TUSD, etc)? Think again.

The posts that you have shared is meaningful and makes a lot of sense, by the thread you shared, DAI seem to be the best stable coin, but I wonder it is not listed on major exchanges like Binance, Bitmex, KuCoin etc.

[BitcoinsGreat]

The market is dumping currently, and all of us are trying to save our funds, one of the best ways to not get REKT is to convert your cryptocurrencies into the stable coins.

For a moment just keep the stable coins aside, do you think that converting the bitcoins into stable coins will save you from being REKT ?
I do not think so. If are good trader and you know bitcoin can dump, then you would have converted into stable coins between 8 - 9K. But those who did not convert at that time and if they convert them now at 6500$, it is too risky as bitcoin can bounce back and then those who have converted will be at loss.

[Rose_btc]

The market is dumping currently, and all of us are trying to save our funds, one of the best ways to not get REKT is to convert your cryptocurrencies into the stable coins.

For a moment just keep the stable coins aside, do you think that converting the bitcoins into stable coins will save you from being REKT ?
I do not think so. If are good trader and you know bitcoin can dump, then you would have converted into stable coins between 8 - 9K. But those who did not convert at that time and if they convert them now at 6500$, it is too risky as bitcoin can bounce back and then those who have converted will be at loss.

I agree with you, never thought from this prospective, TBH I myself have been REKT, I did not convert my coins on time and now I am in heavy loss until bitcoin goes back to 9000$. Still stable coins play a pivotal role in saving your funds.   

[BitcoinsGreat]

The market is dumping currently, and all of us are trying to save our funds, one of the best ways to not get REKT is to convert your cryptocurrencies into the stable coins.

For a moment just keep the stable coins aside, do you think that converting the bitcoins into stable coins will save you from being REKT ?
I do not think so. If are good trader and you know bitcoin can dump, then you would have converted into stable coins between 8 - 9K. But those who did not convert at that time and if they convert them now at 6500$, it is too risky as bitcoin can bounce back and then those who have converted will be at loss.

I agree with you, never thought from this prospective, TBH I myself have been REKT, I did not convert my coins on time and now I am in heavy loss until bitcoin goes back to 9000$. Still stable coins play a pivotal role in saving your funds.   

As i said that bitcoin jumped to 7200$, those who converted near 6600$ will be in loss by now. That is the reason that converting into Stable coins is as risky as doing any altcoin trades in bear market without the perfect TA analysis.
If anyone is a experienced trader, only he can convert to USDT on the perfect time, rest it is too much risky.

[BrewMaster]

funny thing about stable coins is that they are created mainly for exchanges convenience not the users! it may sound odd but if you think about it the only one that is benefitting here is exchanges.
if a trader is presented with two options, fiat and an stable coin and if both have the same options (same fee, volume, price and KYC requirement) they will never choose the stable coin over fiat!
so why do exchanges don't add fiat markets? it is simply because they don't want the risk of using a bank (the bank may close their account, block their funds,...) and want to have more flexibility when it comes to KYC. so they are benefiting from this not users.

[panganib999]

Yes, stable coins were made so that people could quickly convert their BTC to that stable coin to avoid the loss of coins during dumps. However, I don't really think stable coins are doing their job right now. More like its used for transactions so that the fees could be neglected as much as possible, and just to hold coins sometimes, but not really at times of bitcoin crisis dumps. I'm not saying stable coins are bad, but they aren't noticed much because of the lack of opportunities it gives to users.

[bitsurfer2014]

~snip~

Though stablecoins may appear to provide some kind of liquidity to our funds, its worth mentioning that I find it ironic since most of them are also facing liquidity issues, so I don't think they are providing real liquidity to the crypto scene.

I think its best to not confuse ourselves with stablecoin's stability feature and its purported liquidity effect.

[Upgrade00]

so why do exchanges don't add fiat markets? it is simply because they don't want the risk of using a bank (the bank may close their account, block their funds,...) and want to have more flexibility when it comes to KYC. so they are benefiting from this not users.

This is also possible with some stable coins, assets can be frozen even when the coins are held on a personal wallet, where you have full custody. In a bid to achieve full compliance to regulatory laws.  I commented on a thread recently discussing the possibilities and I would like to reiterate the same views I shared:

The possibility of your assets getting frozen is quite unsettling for holders of any currency and shows how centralized such coins really are. They primarily function as fiat currencies which are run in the blockchain and adhere strictly to all regulatory laws.
An article I found also claimed that some addresses have actually been frozen holding assets of about $41 million

The blog also said that while blacklist functionality exists for most stablecoins, “we can only find it having been used on USDT for 16 different addresses.” The study noted 7 frozen addresses for USDT–Bitcoin which accounted for $39,404,629 and 8 of the frozen addresses for USDT-Ethereum worth $1,959,156.10.

The exact reason as to why these funds were frozen was unclear

And the exact reason for the freeze was not made public. In my opinion the demerits of stable coins outweigh the merits.

[audaciousbeing]

The crypto market for me is not ready for stable coins and I don't see majority of them surviving long-term with the exception to USDT. The reason is simple. The crypto market is interesting because of the volatility. The hope that buying now would mean being richer in the near future without being oblivious that it could also lead to being poorer as well. The stable coins are only used as a bridge and when an item is not being used for itself but as catalyst for another, its bound to occupy a secondary position.

[acdc]

Stablecoins are a good choice when the market plummets, people can avoid losses when hiding in stablecoins in the rain.
However, if you want to keep stablecoins for long, be careful because in order to maintain compliance with regulators, many stablecoin issuers have introduced blacklists so they can freeze the stablecoins held at specific address . This ability is also especially useful in case of hacking, but that means the trust we have to put in the publisher so that no malicious action is much greater.
You can find out more here:
https://bitcointalk.org/index.php?topic=5204055.0
https://medium.com/human-rights-foundation-hrf/privacy-and-cryptocurrency-part-iv-stablecoins-for-human-rights-blacklists-and-traceability-6d74ee17c25d