How Truly Stable are Stable coins?
How Truly Stable are Stable coins?
With all the messy situations and controversies we have had regarding stable coins I think many of us have at least some distrust towards stable coins even though they are essentially a very huge part of Crypto.
Even if we we like it or not Stable coins like USDT are here to stay and essentially affect the entire Crypto ecosystem due to its prevalence in and outside of exchanges.
We have also already seen the impact some so called stable coins can have when they untether and just crash and burn taking out anything anything associated with them with the whole Terra situation and Luna situation.
Tether is also not just one of the most popular Stablecoins it is also one of the most popular Cryptocurrencies as a whole which means the impact of it failing will be bigger than anything we have seen before especially when it is already surrounded by controversies.
While they aim for stability, factors such as market demand, collateralization methods, and the stability of the pegging system can impact their actual stability.
People say that Binance going down would bring about Crypto Winter, but crypto’s biggest weakness is without a doubt stablecoins. If they go down, that would be a huge problem. So let’s hope they remain stable. The only 3 requirements for that are: 1) no hacks 2) Mintage that closely resembles that of the currency they’re pegged to 3) trust that the stablecoins themselves are not shady, and cain remain stable during crypto crashes.
I think their stability is reliant on the assets that support them.
They are stable till they aren’t, it is always better to use them as a medium instead of keeping your wealth on them, extremely risky as we saw from Luna’s stablecoin UST.