The Pokemon theory of stablecoins, which I think is approximately correct: https://medium.com/social-capital/tether-part-two-pokedex-november-4-2018-snippets-8f62e01e7772 … ("Explain it like I'm not five?" Speculative mania combined with a credit bubble; going to allocate billions of dollars in cash losses when it winds up.)
Seems like stabilization efforts would probably require a bunch of the winners to take dollars out of their pockets, put them back on table, and use them (via stablecoins/etc) to satisfy capital outflow. That might avert a bank run? Low epistemic confidence in mechanism
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Are we assuming in this scenario that tether is in fact not backed by $? That isn't entirely clear yet imo. If it is backed, it can be unwound at a profit even in a low confidence scenario.
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Matters less exact position of Tether and more how much liquid USD is in the ecosystem and how much demand for it there is. Given arbitrarily long amount of time, illiquidity is a solvable problem, but they may not have an arbitrary amount of time.
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