Are stablecoins becoming a new form of savings in high-inflation countries?

[hugeblack]

Quick question:

Why would someone hold a stablecoin that doesn't grow in value for years, yet there is Bitcoin that is capable of going at least 2x after some months?

Just so you know, even the US dollar is prone to inflation. Which is why people try to look for assets that store value.

Usually because their investments are less than $100 per month and they need that money in less than a year, so keeping Bitcoin may cause a loss in the short term. If the investment is long-term, gold and Bitcoin are a much better, and it is possible to diversify between them.

[avp2306]

Quick question:

Why would someone hold a stablecoin that doesn't grow in value for years, yet there is Bitcoin that is capable of going at least 2x after some months?

Just so you know, even the US dollar is prone to inflation. Which is why people try to look for assets that store value.

Usually because their investments are less than $100 per month and they need that money in less than a year, so keeping Bitcoin may cause a loss in the short term. If the investment is long-term, gold and Bitcoin are a much better, and it is possible to diversify between them.

I think its not always about how small their investment is, but rather their target or goals. Usual thing I've seen from those people choose to hold stablecoins is they are speculating for possible next big dump and they are trying to catch those dips. Those USDT they hold is their reserve to make sure that they have funds to use when that situation came.

If people aim for short term hold Bitcoin or other volatile coins, this might give them negative result. Since those coins could possibly dump and their small funds might get affected.

But will agree on what you have said that if they aim for long term. No other best asset to have is Bitcoin and Gold and statistic and history will show or point out that they are consistent asset which gives great potential return to their investors.

[Y3shot]

I'm curious what others think about this. Do stablecoins represent genuine competition for traditional banking and local currencies, or are they still mostly a temporary tool for the crypto market? And if stablecoin adoption keeps growing in countries with high inflation, could governments eventually see it as a much bigger economic issue than Bitcoin itself?

The stable coin and your traditional currency are still the same thing. The only difference between stable coins and your traditional currency is that stable coins are digital, and their value is tied to your own currency.

It is not really stable because it is pegged to the USD, which is a traditional value affected by inflation. Many people in developing countries see stable coins as an edge to escape inflation; they can be of good benefit for some people, but they are not a store of value. Inflation affects stable coins just like it affects every other currency. Those who spend USD as currency in their country will tell you how badly inflation affects it.

[asriloni]

Usually because their investments are less than $100 per month and they need that money in less than a year, so keeping Bitcoin may cause a loss in the short term. If the investment is long-term, gold and Bitcoin are a much better, and it is possible to diversify between them.

I think it's not even related to the how small money owned by people. If what you said is true, we'd not have more than 300b stable coin in circulation. In fact, stable coin is giving so many benefits such as fixed yield, ability to participate in the ico, providing liquidity, and etc.

Providing liquidty in a hype chain such as Robinhood with stbale coin/ blue chip coin pair can give us daily APR ranged from 30% - 100% ++. So it's enough to offset the inflation even if we're providing LP for several months.

If we're only seeing it from the fiat currency perspective, it sounds useless. However, things changed, and holding stable coin also provides us various ways to also fight inflation. No doubt the demand of stable coin is also growing fast.

We have to see it from various POV to make it fair.

[Synchronice]

I'm curious what others think about this. Do stablecoins represent genuine competition for traditional banking and local currencies, or are they still mostly a temporary tool for the crypto market? And if stablecoin adoption keeps growing in countries with high inflation, could governments eventually see it as a much bigger economic issue than Bitcoin itself?

How can stablecoin itself be a competitor for traditional banking or local currencies? First of all, when it comes to traditional banking, it's a big and the most powerful financial system in the world, stablecoin is just a currency, so it's like comparing apples to oranges. Secondly, when it comes to local currencies, it can compete in some way but irony here is that stablecoins are backed by local currencies, they are nothing without it. And thirdly I would add that all it takes to end the whole stablecoin game is that the government will take a law that will ban stablecoins and that's it, no competitors for local currencies in any form or way.

[Fiatless]

I'm curious what others think about this. Do stablecoins represent genuine competition for traditional banking and local currencies, or are they still mostly a temporary tool for the crypto market? And if stablecoin adoption keeps growing in countries with high inflation, could governments eventually see it as a much bigger economic issue than Bitcoin itself?

Is there any difference between a stablecoin pegged to a national currency and the local currency? Both of them are tied to thesame economy and suffer from thesame economic conditions. The competition might be between a US-backed stablecoin and ones pegged to local currencies. In the case where the local currency loses value rapidly, people will gladly use stablecoins like USDT.

Stablecoins might not pose economic problems since they are issued by centralised companies. The goverment can easily make laws to control the use of stablecoins. They are more concerned about a currency that is decentralised, making it difficult to control.

[BALIK]

And if stablecoin adoption keeps growing in countries with high inflation, could governments eventually see it as a much bigger economic issue than Bitcoin itself?

I would not say this is problem solely for countries with high inflation. It is major issue for developed nation as well.

European Central Bank has likely been working on creating its own digital euro since 2023 or 2024. Why are they doing this? Because they are apprehensive. If ordinary people and business start using dollar or stablecoin instead of euro then their currency's global significance could diminish.

So you would be mistaken to view this merely as problem for poorer nation. Even countries with strong currency fear that dollar and stablecoin could displace their own currency. No govt is taking this matter lightly anymore. And whether you're talking about Bitcoin or stablecoin, they actually place them all in same category.

[viljy]

This trend is indeed present. Especially if transactions involving dollars are heavily restricted. Stablecoins, in turn, are "cross‑border", they are not controlled by banks, and at the same time they can protect against local inflation. Often, stablecoins are more expensive than the dollar when exchanged (not by much, but still, this is an important indicator).

Of course, people who don’t live in such economies simply can’t understand this. They will be trapped in a web of illusions: "dollar inflation" (whereas dollar inflation is like a flea compared to the inflation of the local currency, which is as big as an elephant); "long‑term planning" (well, that’s just ridiculous for most people, whose planning horizon is a few months or even less). Of course, hypothetically, there is a risk of stablecoins being frozen, but what is the probability of that? For most users, it’s negligible.

[Accardo]

I think its not always about how small their investment is, but rather their target or goals. Usual thing I've seen from those people choose to hold stablecoins is they are speculating for possible next big dump and they are trying to catch those dips. Those USDT they hold is their reserve to make sure that they have funds to use when that situation came.

Stable coin is profitable to traders who convert bitcoin to USDT in bullish times, waiting for the bear season to accumulate more btc, with the stables. USDT for instance, gives investors the power to decide whether to go stable or volatile depending on the Market trend. It lessens the burden of high volatility, and bearish season losses, and permits traders the opportunity to be smarter with the market volatility. 

[abhiseshakana]

This trend is indeed present. Especially if transactions involving dollars are heavily restricted. Stablecoins, in turn, are "cross‑border", they are not controlled by banks, and at the same time they can protect against local inflation. Often, stablecoins are more expensive than the dollar when exchanged (not by much, but still, this is an important indicator).

Of course, people who don’t live in such economies simply can’t understand this. They will be trapped in a web of illusions: "dollar inflation" (whereas dollar inflation is like a flea compared to the inflation of the local currency, which is as big as an elephant); "long‑term planning" (well, that’s just ridiculous for most people, whose planning horizon is a few months or even less). Of course, hypothetically, there is a risk of stablecoins being frozen, but what is the probability of that? For most users, it’s negligible.

I can imagine it even i'am not living on a country with hyper inflation. I can understand it because as exporter when The USD weakened, I also immediately converted it to rupiah upon receiving the money to avoid profit erosion caused by exchange rate fluctuations. So i can imagine the pressure reality on a country with extreem inflation.

My simulation as worker when i trapped on a country with hyperinflation economy, when i got my income i will calculate between inflation rate for a month with conversion cost from local currency to USDT on peeer to peer exchange. Then i will choose let the money stay on my local bank account with possibility loose its value within several week or without delay, immediately converting the entire salary into USDT. If conversion cost is cheap then we got solution but problem rise when price of stable coin higher than real USD on local market. a high buying rate plus application fee are cost of conversion i must pay and when i need to spend those money for daily needed i must do reconversion. i think it will draining my money instantly.

I see stable coin not a solution for wide community, it is only for some people who know technology, many lower and middle income family doesn't have digital literation even acces to crypto exchanger for making conversion

[lombok]

I think its not always about how small their investment is, but rather their target or goals. Usual thing I've seen from those people choose to hold stablecoins is they are speculating for possible next big dump and they are trying to catch those dips. Those USDT they hold is their reserve to make sure that they have funds to use when that situation came.

Stable coin is profitable to traders who convert bitcoin to USDT in bullish times, waiting for the bear season to accumulate more btc, with the stables. USDT for instance, gives investors the power to decide whether to go stable or volatile depending on the Market trend. It lessens the burden of high volatility, and bearish season losses, and permits traders the opportunity to be smarter with the market volatility. 

The possession of stable assets can be viewed as a liquidity firepower to implement the purchase in case of a huge drop in prices. The choice on how to hedge profits in digital dollar balances liberates the market players the panic induced by a sharp decline. Cash money is an important aspect in successfully piling up of low-cost primary coins.

The bargaining power of investors is enhanced by the ability to avoid acting in a hurry to purchase a liquidity but resist doing it. With a sharp drop, it becomes in fact a golden opportunity to own the underlying assets without having to inject new capital. Calm calculations protect the development of capital.

[Peanutswar]

But still most of the stable coins are centralized its handles by the Tether and the Circle so basically, they are still relying with the market price of the current dollar rates. Now stable coins just gives convenience to you make an immediate swap into other coins but form of savings I dont think so its could be ideal because its affected by the economic rates so basically it was less volatile it could generate you a small profit like a small percentage of APY but compared with the bitcoin, and alts. So if you wanted to make earnings and save with this inflation dont stack your money like in stable and banks. Go find a way that generates money even you are sleeping.

[TedMosby]

I come from a country that has a weak currency, Indonesia. For years, I've been saving more in USDT/USDC than in my local currency. At first, I did it because my wages/salary are paid in USDT and USDC. Once it's credited to my account, I don't convert it to my local currency right away. I only convert the amount I need. It makes me indirectly have stablecoin savings. With my local currency continuously decreasing in value against the USD, it also helps leverage my savings. So far, savings in stablecoins couldn't fight the domestic inflation, but they do slow my savings from being eaten up by inflation compared to savings in my local currency.

Nowadays, I also often see trends of paying for something locally in stablecoins like USDT through third party apps like Bitget Wallet using national QR payment services. It's like an off ramp payment. USDT is converted to Indonesian Rupiah and then used to pay through QRIS to merchants. I am not sure if this is a threat to my national currency or not, since it can be counted as using USD for local payments. But in the process, at the end point, it's actually converted to Rupiah first before the transaction happens.

Do stablecoins represent genuine competition for traditional banking and local currencies, or are they still mostly a temporary tool for the crypto market?
For me, it's a direct competition. It's arguably the most powerful export that the US has made to third world countries, I think. You can't say it's a temporary tool for the crypto market anymore because there are many people who get paid and spend in stablecoins nowadays. They get it even without being directly involved in the crypto market, especially after there are many services like stablecoin cards and other digital payments using stablecoins available in the market.

And if stablecoin adoption keeps growing in countries with high inflation, could governments eventually see it as a much bigger economic issue than Bitcoin itself?
I think in the end, it would just be treated like regular foreign currency. It would be a serious threat when this foreign currency circulates more than the local currency itself. Lower demand = lower value in that local currency. At that point, governments need to do something.

[Fiatless]

I think its not always about how small their investment is, but rather their target or goals. Usual thing I've seen from those people choose to hold stablecoins is they are speculating for possible next big dump and they are trying to catch those dips. Those USDT they hold is their reserve to make sure that they have funds to use when that situation came.

If people aim for short term hold Bitcoin or other volatile coins, this might give them negative result. Since those coins could possibly dump and their small funds might get affected.

But will agree on what you have said that if they aim for long term. No other best asset to have is Bitcoin and Gold and statistic and history will show or point out that they are consistent asset which gives great potential return to their investors.

What you said is true as people want to keep stablecoins for fast transactions. Traders are in this category since it makes transactions faster and also cheaper. But what people are saying is that you should also be ready for uncertainties. These centralized crypto firms are prone to hacks, deposit freezes, and other restrictions. It is essential to use coins that have security backing. Tether's independent audit reports are not public, so how do you know that one Tether is pegged to one dollar?

[Leahized]

What you said is true as people want to keep stablecoins for fast transactions. Traders are in this category since it makes transactions faster and also cheaper. But what people are saying is that you should also be ready for uncertainties. These centralized crypto firms are prone to hacks, deposit freezes, and other restrictions. It is essential to use coins that have security backing. Tether's independent audit reports are not public, so how do you know that one Tether is pegged to one dollar?

This decision is taken only in the context of controlling high inflation. But how will those states that have not granted legitimacy to crypto cope? I am sure that inflation occurs only in fiat currencies. The USD is used in foreign trade, so partially we are assured that its value will not decrease. It is not completely certain but could reverse later. Due to technological advancements, the level of cyber hacking and various sanctions is continuously increasing. Especially, for the diplomatic laws and war devastation in the international arena.

Yes, investing in Bitcoin is better than using stable coins. It has a higher chance of being profitable while securing assets. Personally, I prefer usdc over usdt. Because comparatively usdt value decreases more. This causes some inflation.

[Hyphen(-)]

This makes me wonder if the biggest economic impact of crypto in some countries might actually come from stablecoins rather than Bitcoin. Maybe the important adoption metric isn't how many people are buying BTC. Maybe it's how many people are quietly using digital dollars because their own currency isn't doing its job.

If we relate this discussion to weak currencies as you have explained in this thread, some country citizens are actually preferring to hold USDT over their local currencies and I think my country and I can be an example.
The rate at which our local currency is decreasing in its value with time is somehow, there is no any courage or saving in my local currency anymore because inflation will affect t the value of the money within some period of time, this has been the reason why some citizens are choosing to hold stable coins crypto to be precise since buying dollar from banks also have their regulations, instead of buying from bank, crypto see stable coins is preferable.

I'm curious what others think about this. Do stablecoins represent genuine competition for traditional banking and local currencies, or are they still mostly a temporary tool for the crypto market? And if stablecoin adoption keeps growing in countries with high inflation, could governments eventually see it as a much bigger economic issue than Bitcoin itself?

For governments that care, it should be a bigger threat to the economy of their countries because once their citizens adopt investing in stable coins instead of holding their local currencies, there will be inflation and the value of their local currency will drop.

[viljy]

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My simulation as worker when i trapped on a country with hyperinflation economy, when i got my income i will calculate between inflation rate for a month with conversion cost from local currency to USDT on peeer to peer exchange. Then i will choose let the money stay on my local bank account with possibility loose its value within several week or without delay, immediately converting the entire salary into USDT. If conversion cost is cheap then we got solution but problem rise when price of stable coin higher than real USD on local market. a high buying rate plus application fee are cost of conversion i must pay and when i need to spend those money for daily needed i must do reconversion. i think it will draining my money instantly.

I see stable coin not a solution for wide community, it is only for some people who know technology, many lower and middle income family doesn't have digital literation even acces to crypto exchanger for making conversion

I agree, this is a problem. However, if USDT is used for saving and conversion into local currency is not done too frequently, then this can be accepted as inevitable overhead costs. It’s much worse when the government puts all sorts of obstacles in the way, and people have to look for workarounds.

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I am not sure if this is a threat to my national currency or not, since it can be counted as using USD for local payments. But in the process, at the end point, it's actually converted to Rupiah first before the transaction happens.
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In this case, USDT does not act as a form of currency, but as a commodity that you sell for the local currency. This has no other impact on the local financial system and does not threaten the local currency. Simply because the inflation of the local currency itself (due to which the population is forced to use USDT as a store of value) is highly likely to represent dollar inflation exported to your country (for example, through the central bank's foreign exchange reserves mechanism)... Dollar inflation is exported all over the world through its endless emissions, so it's like the weather every day. The impact of stablecoins on this is negligible, if any at all.

[davis196]

I'm curious what others think about this. Do stablecoins represent genuine competition for traditional banking and local currencies, or are they still mostly a temporary tool for the crypto market? And if stablecoin adoption keeps growing in countries with high inflation, could governments eventually see it as a much bigger economic issue than Bitcoin itself?

1.Stablecoins are losing value as well, since they are pegged with fiat currencies, that are slowly losing value. I totally understand why the people would prefer to hold USDT or USDC, which loses 5% per year than their own national currency, which loses 15-20% per year. Choosing the smaller loss is a rational decision, but the loss is still there.
2.Stablecoins aren't fully decentralized and there's always a risk, that they might collapse and the stablecoin holders would lose everything.
AFAIK, Tether can block stablecoin transactions, which seems like a huge risk for long term stablecoin holders.
I don't live in a high inflation country(the annual inflation where I live is around 5-7%) and so far I haven't met anyone in my social circle, who actively uses stablecoins.

[angrybirdy]

Quick question:

Why would someone hold a stablecoin that doesn't grow in value for years, yet there is Bitcoin that is capable of going at least 2x after some months?

Just so you know, even the US dollar is prone to inflation. Which is why people try to look for assets that store value.

I think that some people prefer to have a stablecoin instead of bitcoin regardless of its current value, its because they want stability and predictable price movements rather than growth that btc offers to everyone. Sometimes they prefer this because they don’t want to hold their money for long term type of investments and they may need to use it sooner or later. It is kinda similar to a typical savings in a bank, where they can withdraw their money whenever they need it asap...I also just learned that some stablecoins serve as digital money nowadays, especially for those people who usually makes an international transfers..They can make these transactions easier and more convenient, without any hassle to their end.

[arwin100]

I'm curious what others think about this. Do stablecoins represent genuine competition for traditional banking and local currencies, or are they still mostly a temporary tool for the crypto market? And if stablecoin adoption keeps growing in countries with high inflation, could governments eventually see it as a much bigger economic issue than Bitcoin itself?

1.Stablecoins are losing value as well, since they are pegged with fiat currencies, that are slowly losing value. I totally understand why the people would prefer to hold USDT or USDC, which loses 5% per year than their own national currency, which loses 15-20% per year. Choosing the smaller loss is a rational decision, but the loss is still there.
2.Stablecoins aren't fully decentralized and there's always a risk, that they might collapse and the stablecoin holders would lose everything.
AFAIK, Tether can block stablecoin transactions, which seems like a huge risk for long term stablecoin holders.
I don't live in a high inflation country(the annual inflation where I live is around 5-7%) and so far I haven't met anyone in my social circle, who actively uses stablecoins.

You write a good point. Those situations you have written is part of the reason on why Stablecoins is not really good asset to use to fight inflation.

Also its hard to trust the wealth of the country on decentralize company, since there's chance that they might be in losing side here. So instead of thinking about stablecoins. Much better for countries to choose those appreciating assets like Bitcoin and Gold, since with this asset they provably could earn good returns if they hold it for long term.