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SBF
@SBF_FTX
1) A good point someone brough up recently: really 'stablecoin' is used to mean multiple different things.
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SBF
@SBF_FTX
Just as the outside view skeptics predicted, during a large market move a stablecoin blew out. Just not the stablecoin they predicted. Which was predictable, if you knew the details. This isn't a comment about good vs bad--it's about how important it is to know the details!
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SBF
@SBF_FTX
2) One thing it can mean is "stablecoin backed 1:1 by USD in a US bank account". That's what current drafts of US regulations are looking to license, as a first step.
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SBF
@SBF_FTX
3) Another is "stablecoin backed >= 1:1 by liquid debt assets, treasuries, and USD". Non-zero price risk, but generally they stay very close to $1 because they can be redeemed. E.g. USDT has stayed within a few % of $1 during this crash, and hearing $1b+ successfully redeemed
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SBF
@SBF_FTX
4) A third is "stablecoin backed >= 1:1 by a very volatile asset". Those are 'algorithmic' stablecoins. If the underlying crashes they can go down. A lot. e.g. UST.
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SBF
@SBF_FTX
Replying to
@SBF_FTX
6) This might not seem as important to people in crypto, because we already know that algo stablecoins are pretty different from fiat backed ones. But in the policy space, that message often gets lost. We need to be explicit about it.
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Seraphim @ Zurich🇨🇭
@MacroMate8
Replying to
@SBF_FTX
Another way to think of algo stables is they’re an Emerging Market currency peg. Unless reserves are 1:1 (unlikely), it works as long as the investors have trust. Once that’s gone, the peg is gone.
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hanzolo.eth
@HanzOlo19
Replying to
@SBF_FTX
A little late since many have already lost their life savings 😢 But propose ANTI-stable (where ANTI also acronyms for Algorithmic Not Totally Innoxious) to be very clear warning to all (noobs and supposed experts) going forward.
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