What happens if a stable coin is in high demand?

[Vaccaria]

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

[rodalutor]

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.

[tosmartak]

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.

[admosfir]

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

[frowsiter]

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.

[Neraj Evad]

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.

[O$IRIS]

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. 

[needtor22]

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.

[gunhell16]

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.

[InformerKin]

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.

[davis196]

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.

[shelemiah31]

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.

[Mr.grin]

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. 

[ShitTL]

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.

[jrrsparkles]

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.

[Ucy]

My question is: Does a stable coin have a set total coin supply?

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.

[Vaccaria]

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.

[vit05]

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

[h0lybyte]

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

[pinkflower]

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

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.