Unbacked stable coins are a big danger

[BlockchainWizard]

We have Bitcoin and it is a very good coin.
Many people are in favor of Bitcoin because it is a store of value and we can hedge inflation against it.
But many people are afraid of Bitcoin’s volatility because Bitcoin has been very volatile. For example Bitcoin was at 31,000 USD last year in summer, at 42,000 USD last year around christmas and is at 69,000 USD now. It is still very volatile.
To solve volatility, many people have bought so called stable coins.
A stable coin  is a stable coin because it is stable  - not volatile. But when reviewing such a stable coin, we can spot many dangers:


Stablecoins are no solution

Stablecoins are no solution. It might be stable for some time and can work but at what cost? At a high cost!


Unbacked stablecoins should be illegal

Unbacked stablecoins should be illegal. Because why should it be allowed to provide such a crap and have no insurance?
Every distributir of stablecoins should prove a backing of such stablecoins.
I fit is a 1-Dollar stablecoin, it needs tob e backed by 1 dollar.
If it‘ not backed, it should not be allowed tob e traded because it is huge risk for boyers in case it is getting hacked or collapsing.


For our coins to be safe, we need to avoid unbacked stable coins because of risk.

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[un_rank]

But many people are afraid of Bitcoin’s volatility because Bitcoin has been very volatile. For example Bitcoin was at 31,000 USD last year in summer, at 42,000 USD last year around christmas and is at 69,000 USD now. It is still very volatile.

That looks like some progressive volatility, which attracts a lot of people to Bitcoin. A 100% increase in value is not an ROI you get from many assets in less than a year.

Many people are in favor of Bitcoin because it is a store of value and we can hedge inflation against it.
...
Unbacked stablecoins should be illegal. Because why should it be allowed to provide such a crap and have no insurance?

They should be, but they do their auditing themselves and assure you they are backed 1 for 1. How about holding the currency they are backed in if your sole purpose is to hedge against inflation.

- Jay -

[jrrsparkles]

The definition of stablecoin is, that USD or any other fiat backs it.

This is free market, everyone can launch their own project whether it'd value depends on its demand and supply or like USDT, its value is pegged to USD but we never know the creator actually has reserves for the printed tokens or if they just do it out of thin air that's why it's not suitable for holding and people mainly uses it for trading.

[Dunamisx]

We have Bitcoin and it is a very good coin.
Many people are in favor of Bitcoin because it is a store of value and we can hedge inflation against it.

When there is  bitcoin, i don't see a reason to of going for stablecoin, we can only hold our asset in it for a while before we exchanger it for bitcoin, there are many advantage in which we can have in holding bitcoin over stablecoin, such could be as it has been highlighted having proof over inflation, we can as well earn profits in holding our asset in bitcoin than when we do with stablecoin, some have believed that stablecoin is just a crypto but has similarities of fiat because of the value and influence of inflation as it has been pegged with USD.

[letteredhub]

Stablecoins as the name express is greatly known for its suppression to fluctuation and volatility that other cryptocurrencies like bitcoin is known for. And it's as a result of the nature of their stability  that traders hold their asset in stable to retain it's value within the short time before use for trade. Hence the stability, a lot of persons have made losses leaving their money in a stablecoin project that was built on a scam exit plan.

[Pandorak]

[...]
Stablecoins are no solution. It might be stable for some time and can work but at what cost? At a high cost!


[...]
Unbacked stablecoins should be illegal. Because why should it be allowed to provide such a crap and have no insurance?
Every distributir of stablecoins should prove a backing of such stablecoins.
I fit is a 1-Dollar stablecoin, it needs tob e backed by 1 dollar.
If it‘ not backed, it should not be allowed tob e traded because it is huge risk for boyers in case it is getting hacked or collapsing.

The cost depend on what network you use, let me give you a breakdown of transfer fees from several networks:

Ethereum: 0.00186 ETH ($6,46) ^[1]
Solana: 0,000005 SOL ($0,00096) ( ^[2]
Polygon: 0.00549 MATIC ($0,01) ^[3]
Binance Chain: 0.000056 BNB ($0,03) ^[4]

I also agree that every stablecoin should have a clear underlying asset, if it is backed by dollars then there must be 1:1 proof as well as others such as those backed by commodities and crypto. We don't want to see cases like LUNA-UST again which destroyed a lot of people out there, to this day i never want to go to algorithmic stablecoins again.

For me, bitcoin is a safe haven, but i also still need stablecoins which are easier to use for my daily needs, whether it's for withdrawals or sending small amounts of money to my friends.

[1] https://etherscan.io/tx/0x9112a64857783085a4c7b98d057656be7d02e90f45def79e235ec5d3af02709f
[2] https://solscan.io/tx/5e9fMWdPqZT1zUr9qo2Hdi9uVc81eeUrBkwL9CFKLC5euMcgGkd96GNJ5Ae7NAMpVrBcjfEoUmNPW5TCwh1ojK9y
[3] https://polygonscan.com/tx/0x7ad34fedd5c71109ec706ffa16d4303e8c0a20778f4e1360afa4d18977cf34e8
[4] https://bscscan.com/tx/0xa5ef3afb4d7e0c14d6677136fdfac08ceb4e0d80449423350e0f289507cab28d

[Coyster]

For our coins to be safe, we need to avoid unbacked stable coins because of risk.

No stablecoin issuer is going to tell you that their stablecoin is not backed by what they say it is backed by. So there is risk with every stablecoin, because you cannot verify if they are truly backed 1:1 or they just print so many of them anytime they want to, pegged to nothing but thin air. Mind you as well that stablecoins can be frozen by the issuers anytime, in any wallet, these are the reasons why stablecoins should not be held for the long term.

[Abu-Naim]

To solve volatility, many people have bought so called stable coins.
A stable coin  is a stable coin because it is stable  - not volatile. But when reviewing such a stable coin, we can spot many dangers:

Stable coins are mostly centralized, it is not advisable to hold them, they can only be stable for a while when everything is goin normal, but when bankruptcy is coming, it will lose its value, we have seen cases when FTM crashes.
Volatility is what make Bitcoin valuable, you need to just invest in it to store the value of your investment against inflation and you will even gain from the investment if you are patience to hold for long.
Buying stable coin is not an option in my opinion.

[Ojima-ojo]

We can't take table as an investment since it value can not exceed a certain fixed amount just like the USDT which have iax value of $1 it's just good as point of exchange and nothing else, holding stable coins abt risk intense so it not classified investment.


Memecoins or other layer2 projects may also be some high risk since their lack usercase for the project some of them lack blue print so it just build based ob speculation.

[hatshepsut93]

Unbacked stablecoins should be illegal

Well, that would require government regulation, and all the crypto enthusiast think that it's the root of all evil and the government shouldn't be trying to protect them from scams. A lot of things in crypto should be illegal but aren't because regulators don't want to tire themselves with the hard work of enforcing bans. For example, creating a token with a promise that it will work and have some features, and later failing to deliver that due to lack of trying is essentially a scam, yet it has never been classified as such so scammers can completely legally do that.

[tranthidung]

For example Bitcoin was at 31,000 USD last year in summer, at 42,000 USD last year around christmas and is at 69,000 USD now. It is still very volatile.
To solve volatility, many people have bought so called stable coins.

They did not buy stablecoins because stablecoins are stable and Bitcoin is volatile.

They usually consider stablecoins as alternatives for fiat currencies than alternatives for Bitcoin. Rather than cash out Bitcoin to fiat currency and wait for chances to enter the market again through fiat currency, they take profit from Bitcoin to get stablecoins and wait. That's it.

If you interpret it as they sell Bitcoin to have stablecoins just because they want to solve volatility, it's not correct.

A stable coin  is a stable coin because it is stable  - not volatile. But when reviewing such a stable coin, we can spot many dangers:

Stablecoin is a name but whether its value (peg) is stable or not, it depends on its peg to a fiat currency, for example, the US. Dollar. If a stablecoin loses its peg, it is no longer stable.

This following report can give you some insights.
Stable coins: a deep dive into valuation and depegging.

[Kelward]

The relevance of stablecoins in the crypto market is because of crypto volatility, so to retain the value of the crypto, a trader can convert it to stablecoins, inorder not to lose during price dip, so they just act on the interim to fill a gap pending when the owner needs to convert back to crypto. It's better to use reputable stablecoins like tetter usdt, that is pegged to 1 US dollar, than other stablecoins that have not gained reputation in the crypto space. However during bull run, it's better to leave your funds in Bitcoin, because there's high probability that it's price will keep increasing, even when you want to convert it to altcoins, you'll be in profit, compared to stablecoins that'll not add any profit for you.

[Lucius]

The problem is not only in whether or not the so-called stablecoins are backed by anything, but also in the fact that most of them are centralized to such an extent that their issuers can freeze them at any time. All those who use stablecoins for any reason are therefore always exposed to these risks - so the question arises whether it makes more sense to trust fiat currencies of central banks or so-called stablecoins, which are practically the same thing issued by private companies.

The volatility of Bitcoin can be a problem for those who invest in the short term and are also prone to panic - but if you are in Bitcoin for the long term, then this volatility can only be an advantage, not a disadvantage.

PSA: Most Stablecoins Can Be Frozen, Even in Your Own Wallets

[Crypt0Gore]

Thanks for the warning, I have hold Bitcoin as my store of value much more longer than USDT or other stablecoins, apart from the fact that Bitcoin is not as stable as USDT and others, I still choose Bitcoin because it's more reliable and its also decentralised.

I do believe that USDT is regulated and backed and its centralized, if its not it would have died a long time ago, there was a time where the fear of USDT depegging was in the air and it never happened.

I hold USDT for short period of time, for buying opportunities and also for profit taking opportunities but thanks for the warning, I want to believe that USDT is a reliable digital USD but some dangers still lurks around it.

Your money is still safer with Bitcoin than stablecoins, every Bitcoin volatility is welcomed by me, what is important the most is the timing.

[PrivacyG]

Many people are in favor of Bitcoin because it is a store of value and we can hedge inflation against it.
But many people are afraid of Bitcoin’s volatility because Bitcoin has been very volatile. For example Bitcoin was at 31,000 USD last year in summer, at 42,000 USD last year around christmas and is at 69,000 USD now. It is still very volatile.
To solve volatility, many people have bought so called stable coins.

This makes ZERO sense.  Why even purchase Stable Coins if you can simply purchase Fiat instead?

Bitcoin is not even close to what Stable Coins are.  They are two different categories of Currencies, Bitcoin being the real one out of the two.  If you want no volatility, purchase Fiat directly.  At least you will not run into further unnecessary trouble.

[Gladitorcomeback]

Although what you said about stable coins that aren't backed is true, I don't think people buy or hold stable coins just because Bitcoin or other cryptocurrencies are volatile and they don't want to buy them, but they use stable coins because they need a cryptocurrency that can hold their funds after they buy or sell a volatile cryptocurrency and can trade effortlessly without having to worry about the ups and downs of the market. So it's just a short-term sort of a thing.

For the long run, most people prefer Bitcoin regardless of its volatile nature because it tends to provide more value when it's held for a long time and one cannot ask for more, that is the basic purpose of most people getting into this industry, to get profit and add more value to their wealth or money they own.

[goldkingcoiner]

The problem is not only in whether or not the so-called stablecoins are backed by anything, but also in the fact that most of them are centralized to such an extent that their issuers can freeze them at any time. All those who use stablecoins for any reason are therefore always exposed to these risks - so the question arises whether it makes more sense to trust fiat currencies of central banks or so-called stablecoins, which are practically the same thing issued by private companies.

The volatility of Bitcoin can be a problem for those who invest in the short term and are also prone to panic - but if you are in Bitcoin for the long term, then this volatility can only be an advantage, not a disadvantage.

PSA: Most Stablecoins Can Be Frozen, Even in Your Own Wallets

It is not the stablecoins themselves which have the main issue of being centralized, although they do add another layer of centralization on top of their blockchain, which is already semi-centralized.

Binance chain, Ethereum, all centralized from what I can tell. Binance chain has what, 21 validators? Ethereum is now PoS (Proof-of-Stake) and two addresses controlled almost half of all Ethereum nodes on day 1 of the PoS launch. Obviously the future of stablecoins is steering into the direction of centralization.

But if people wanted to avoid the downsides of fiat, why would they peg their crypto to fiat? Do they not understand why it is important to get rid of their Fiat in the first place?
1 BTC = 1 BTC.

[tabas]

The definition of stablecoin is, that USD or any other fiat backs it.

This is free market, everyone can launch their own project whether it'd value depends on its demand and supply or like USDT, its value is pegged to USD but we never know the creator actually has reserves for the printed tokens or if they just do it out of thin air that's why it's not suitable for holding and people mainly uses it for trading.

And that issue is never dying for Tether. I have no updates if it's already done or they're able to prove their claim that they're 100% backed and has that reserve on their vaults. But for the likes of other stable coins that are made by centralized platforms and exchanges, they've got the eyes of the regulators hot on them and that's why they have to comply. I am not saying to choose them but each of them can have their own issue if it's about backing their own reserve so, choose wisely if you're going to keep your money in stablecoins during this bull run or with any season of the market.

But if people wanted to avoid the downsides of fiat, why would they peg their crypto to fiat? Do they not understand why it is important to get rid of their Fiat in the first place?
1 BTC = 1 BTC.

Well said, money is safe and sound if it's in BTC as it's the actual money.

[Benedictare]

   Stablecoins are cryptocurrencies whose market value is tied up to another currency or to external references. They are more useful  than being more volatile cryptocurrencies as means of exchange . Stablecoins are fasten to the U.S currency that is dollar also to a commodity like gold.

   Stablecoins try to get price stability by maintaining to keep for later use asset as collateral or through algorithmic formulas which are suppose to control supply.

   It aims at providing and offering a choice to high volatility of most popular cryptocurrencies including Bitcoin.

[Coyster]

Stablecoins are cryptocurrencies whose market value is tied up to another currency or to external references. They are more useful  than being more volatile cryptocurrencies as means of exchange

It is not so clear what you want to say here, but stablecoins might be "stable", but they can be depegged at anytime. Stablecoins is no doubt useful in the cryptocurrency industry, particularly for traders, but because of the risk they pose, risk such as centralization and the ability to freeze people's funds, it is not advisable to hodl stablecoins for too long.

It aims at providing and offering a choice to high volatility of most popular cryptocurrencies including Bitcoin.

Stablecoins is not an alternative to Bitcoin, they are very different types of crypto, to name one example, Bitcoin is decentralized, whilst stablecoins are centralized.