Just Learnt About A Major Risk Involved In Stable Coins

[Franctoshi]

Op, The forum is indeed a great place to be when seeking knowledge or information about crypto basically for anyone interested in gaining more knowledge because some came for a different purpose. I must admit that the year plus that I have spent here so far has hugely transformed my life based on the kind of information and knowledge that the forum has equipped me with. Keep learning mate!

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[Hamza2424]

This forum is really helpful I must confess. I never knew about Pegging and Depegging. But after my previous post on whether to save in stable coins or my local currency, I got to know that even stable coins have their own risks involved, in which Depegging is one of the major risks  

I'm very happy I asked the question and other users really responded very well. All the responses were really helpful. I think other newbies like myself learned a lot from the replies.

De-pegging of the stablecoin has been an ongoing science since these coins were introduced, To analyze stable weather its risk-free or not you have to check out the reserves on the back of the Coin. As Algorithmic stablecoins are one of the riskiest stable coins proven by the Luna incidents there few team flaws and kind of manipulation factors as well but still you have to think before holding the algorithmic stablecoins. Most the people prefer USDT but I think it is one of the most shady stable coins, I think BUSD is safer than the USDT, this is my personal belief.

[Coyster]

I never knew about Pegging and Depegging. But after my previous post on whether to save in stable coins or my local currency, I got to know that even stable coins have their own risks involved, in which Depegging is one of the major risks

How did you think stable coins get their 'value', they are of course pegged to certain fiat currencies or other cryptocurrencies, thus they can also lose their peg or the issuing company can go insolvent, and since they hold the reserves that keep the stable coin at 1:1 on what they are backed by, it then becomes useless.

Having said that, i'd advice you to save your money in your local fiat bank rather than in stable coins, the money in your bank account is insured up to a certain amount and if the bank fails you'll get something back, the average bank also provides better security for your money than with stable coins which can be frozen in any wallet that it is stored in.

[GeorgeJohn]

Can you also agree to the fact that even the so-called stable coins are not always stable?

Many stable coins ask us to have faith that they're backed by reserves, kept in banks. They want us to think it's different from Bitcoin.

They are only trying to bring an old way of doing things, but on a blockchain.

It's obvious that stablecoins also have risk measure you can as well try to avoid, when emphasising on stablecoins you should know that they also expericnce devaluation sometimes, but I don't know actually what some people think is a stablecoins, because a stablecoins so many of it is centralized whereas few might be decentralized. I like you to make a proper research of stablecoins and figures out the risks involved in stablecoins, and when emphasising on it you also include the source

[Nwada001]

You are right, and yes there are many other factors also exist which impact pegging and de-pegging.

One thing I know supports the value of the so-called stablecoins is the amount that the owners are willing to pump into them in order for them to retain their price. Left to survive alone, it will lose its value over time. or if the project happens to fail along the line, the coin will definitely lose value in an instance. This is to say that the survival of most stable coins is dependent on their developers and the success of their project.

[Woodie]

This forum is really helpful I must confess. I never knew about Pegging and Depegging. But after my previous post on whether to save in stable coins or my local currency, I got to know that even stable coins have their own risks involved, in which Depegging is one of the major risks  

Above all things, it's also important to state that as much as this " Pegging and Depegging" is considered as a risk, it actually doesn't happen often which is why stablecoins are still in use today, meaning they might not be of high risk after all
But what really scares the fintech world when it comes to stablecoins,  has to be the centralized foundation they are built on which still remains in our subconscious as someone has an invisible hand in them which is the major risk imo...

[letteredhub]

This forum is really helpful I must confess. I never knew about Pegging and Depegging. But after my previous post on whether to save in stable coins or my local currency, I got to know that even stable coins have their own risks involved, in which Depegging is one of the major risks  

Yeah you're so right about that, stablecoins are pegged to fiat currency and that's where their risk is because they are centralized currency which can be frozen by an order of court in any case affecting even the stablecoins in your personal wallet. And I don't get it why it should be called stable-coin when it's not always stable in exact value to the pegged currency.

I'm very happy I asked the question and other users really responded very well. All the responses were really helpful. I think other newbies like myself learned a lot from the replies.

Learning in the forum is not concentrated to newbies alone, both newbies and olders members of the forum do learn from each other as no one is an autarchy of knowledge and that's why we're advised to ask reasonable and valid questions and contributions which can be of benefits someone somewhere in the forum.

[Okwara]

This forum is really helpful I must confess. I never knew about Pegging and Depegging. But after my previous post on whether to save in stable coins or my local currency, I got to know that even stable coins have their own risks involved, in which Depegging is one of the major risks  

This is not the only problem, but these currencies are centralized and your money can be frozen even if it is inside your wallet^[1]. Ownership of such currencies is not limited to the private key that you own, but rather it belongs to the company and gives you the right to use it in exchange for paying its full value, so it is worse than cash, which enables you to act absolute in it.

With the exception of DAI, almost all stablecoins are highly centralized.

Read more ----> PSA: Most Stablecoins Can Be Frozen, Even in Your Own Wallets

[1] Circle Confirms Freezing $100K in USDC at Law Enforcement's Request

Thanks, this is yet another risk involved. As a matter of fact, this was my first time of hearing about this Pegging And Depegging of a thing. I'm glad to be part of this forum. It is truly a place to gain some knowledge, especially if you're a crypto enthusiast.

[tvplus006]

...I got to know that even stable coins have their own risks involved, in which Depegging is one of the major risks  ..

It is for this reason, if you have such an opportunity, you need to keep your savings in USD, not stablecoins. And no matter which stablecoin you choose, you can't be sure that it won't suffer the same fate as UST. In addition, most of the stablecoins are centralized and can be blocked in your wallet.

[Bushdark]

Can you also agree to the fact that even the so-called stable coins are not always stable? They try as much as they can to retain the exact amount equal to that of the dollar or whatever currency they are pegged with, but over time they usually lose some value. For example, it sometimes moves from the figure of 1-1 and brings it over to 100/99; that is to say, 100 USDT might be worth 99 USD. The pegged one is losing some value, but this is not caused by it being depegged; I believe it's as a result of market demand. Correct me if I'm wrong.
 

They are not actually stable just like the USD is not that stable. Although there can be differences in price but it is not always large compared to the volatile coins. Stable coins are good for us to hold when we notice that there could be a possibility that the market is going to be bearish which can lead to loses that is why we need to analyze the market In the proper manner so that we can see before things happens. Stable coins are stable because they are not volatile like the random coins in the market that do depends on volatility to survive the market.

[tvplus006]

...I think BUSD is safer than the USDT, this is my personal belief.

You obviously missed the news that Paxos Trust Company, which is the issuer of the BUSD stablecoin, suspended the issue of new BUSD tokens in February 2023. Paxos will continue to support this stablecoin until February 2024, after which BUSD will turn into an unsecured token.

[Obari]

This forum is really helpful I must confess. I never knew about Pegging and Depegging. But after my previous post on whether to save in stable coins or my local currency, I got to know that even stable coins have their own risks involved, in which Depegging is one of the major risks  

This is not the only problem, but these currencies are centralized and your money can be frozen even if it is inside your wallet^[1]. Ownership of such currencies is not limited to the private key that you own, but rather it belongs to the company and gives you the right to use it in exchange for paying its full value, so it is worse than cash, which enables you to act absolute in it.

With the exception of DAI, almost all stablecoins are highly centralized.

Read more ----> PSA: Most Stablecoins Can Be Frozen, Even in Your Own Wallets

[1] Circle Confirms Freezing $100K in USDC at Law Enforcement's Request

With this been said, I also wish to know if the usdt can also be frozen as we?
If yes, then this is bad because I’ve always know it to be a digital U.S. dollar and with this I’m already getting scared of getting hold of them as it seems there are already a lot of risk associated with holding them

Someone also asked me sometimes ago about the possibility of freezing digital assets and since I believed tha whatever coin in your wallet with your private key can’t be frozen then I might be wrong with my thoughts an thanks to this thread as I’ve also Lear something new

[nelson4lov]

This forum is really helpful I must confess. I never knew about Pegging and Depegging. But after my previous post on whether to save in stable coins or my local currency, I got to know that even stable coins have their own risks involved, in which Depegging is one of the major risks  

I'm very happy I asked the question and other users really responded very well. All the responses were really helpful. I think other newbies like myself learned a lot from the replies.

While all stablecoins can depeg, it's worth noting that Exogenous stablecoins (stablecoins whose value is backed by assets outside of the protocol that powers it) are less likely to depeg and end up in a dead spiral like what happened to the UST stablecoin. It was an endogenous stablecoin (and algorithmic) and thus, it had a high likelihood of depegging and it did. Best approach I've seen is just to stick to USDT as a beginner and save yourself some trouble since we know USDT works and has worked longer than any other stablecoin.

[Cookdata]

This forum is really helpful I must confess. I never knew about Pegging and Depegging. But after my previous post on whether to save in stable coins or my local currency, I got to know that even stable coins have their own risks involved, in which Depegging is one of the major risks  

I'm very happy I asked the question and other users really responded very well. All the responses were really helpful. I think other newbies like myself learned a lot from the replies.

Fair enough that you knew this but many investors think that when the market is very volatile, the next thing that comes to their mind is to convert everything they have to a stable currency, for short term it is the good but using it to hold value have his own side effect. Some months ago, USDC deppeged in value, they have to use some back up funds to close that loss before it pumped back to 1:1 of the real price to USD.

Stablecoin values lies on what assets they are backed with, the ones we have right now are not transparent enough, I'm not sure why they are always like that but they don't disclose how strongly the asset that back the ticker name they list on public exchange and that is why you shouldn't trust, they are business enterprise by the way so you shouldn't trust them at all.