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The market rides a roller coaster, and we have once again witnessed history.
In this black swan event, the linkage of the currency market plummeted, and various media directly called "the myth of Bitcoin's risk aversion has been broken." And when all kinds of assets seem to be in a bit of a mess, the stable currency has become that touch of green among the colorful.
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Part of the crypto market on March 12
According to the data on Skew, during the period of violent market fluctuations, the stablecoin USDT accounted for 60%-75% of BTC transactions, and the market value of Tether, the issuing company of USDT, once soared to 4.8 billion US dollars. At the same time, USDC also experienced the same increase in market value . In this regard, Circle CEO Jeremy Allaire said that although the price of the currency has plummeted, there is still good news-the demand for the stablecoin market has surged, which shows that the currency infrastructure based on the blockchain has begun to play a role.
Regardless of the reasons, it is certain that the demand for stablecoins will increase significantly after the crash. Stablecoins have become a hedge for crypto investors against sudden market drops. Or, conversely, driven by extremely high positive premiums, stablecoins have become a temporary home for mainstream currency sellers to transfer their assets.
All of a sudden, comments about the safe-haven properties of stablecoins were flooded in various media.
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Stablecoins in volatility
The first thing to explain is that not all stablecoins can maintain price stability in a plunge. Stablecoins that use cryptocurrencies as collateral, such as DAI created by MakerDAO, BitCNY with BTS as collateral, BitUSD, and nUSD created by Havven, etc., when the price of the digital currency anchored by them falls, these stablecoins will be liquidated due to liquidation. The simultaneous evaporation of repurchase and destruction will only cause a further shortage of market funds and exacerbate downside risks.
Under the tide of redemption, how can there be any eggs
Similar plots have been staged more than once before: as early as the beginning of 2018, the "hacking incident" directly prevented users from redeeming US dollars from Tether and Bitfinex. Bitfinex raised the transaction threshold after resuming new user registration: deposit 10,000 Only US dollars or equivalent cryptocurrency can be traded, and some users who do not meet the standards cannot withdraw fiat currency; at the end of October 2018, due to the bankruptcy of the USDT custodian bank, USDT accounts were sold in panic, and USDT plummeted. However, Bitfinex locked these accounts and made payment difficult. The trading platform KuCoin also immediately suspended the deposit and withdrawal functions of USDT...
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In November 2018, Reddit forum netizens questioned the delay of bitfinex withdrawal
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More importantly, the topic of "stable currency instability" has long been a commonplace. Gemini had accidentally closed an over-the-counter trading account trying to redeem the stablecoin GUSD. PAX found codes that could freeze wallets and destroy related tokens at will. USDT worth $30.95 million was stolen from Tether's wallet by attackers... ....Since its inception, reports of a credit crisis for stablecoins abound.
For fiat currency-collateralized stablecoins headed by USDT, most of them have the problem of highly centralized management and opaque operations due to their issuance and mortgage methods, that is, "under the banner of decentralization, manage centralized platform". There are 1:1 compliant stablecoins anchored to the US dollar that may be more secure in terms of security issues, but at present, the unsecured, non-endorsed non-compliant stablecoin USDT firmly occupies nearly 80% of the market. Credit cannot be fully guaranteed, and issues such as false over-issuance, price manipulation, and the possibility of 1:1 exchange of US dollars have been repeatedly questioned.
Leaving aside the issue of false over-issuance for the time being, the possible consequences of additional issuance are more worthy of discussion. According to the data from DAppTotal.com in the figure below, during this market crash, stablecoins led by USDT were issued frequently to increase liquidity in the market and ease the further decline in the market.
Data source: DAppTotal.com
This method similar to "quantitative easing" seems to be the same as the regulatory mechanism of the traditional financial market, but it is not. In the traditional financial market, when the central bank releases liquidity, it needs to consider multiple factors and regulate the economy through a variety of monetary tools instead of printing and issuing currency blindly. In the currency market, the additional issuance of such stablecoins led by USDT seems a bit random. An anonymous report called The Tether Report aroused heated discussions earlier. The report pointed out that Tether does not rely on organic business development. , but based on market conditions to print and distribute. John Griffin, a professor at the University of Texas at Austin, also mentioned this in a paper published on SSRN. When the price of Bitcoin fell, USDT was issued and used to buy Bitcoin, and when Bitcoin There is no redemption data when the price rises.
Based on this, the encryption analysis media Ourea has written a USDT thunderstorm script.
The picture is organized from: encryption analysis media Ourea article
In other words, such additional issuance may stimulate the recovery of currency prices in the short term, but because it releases liquidity without considering any economic issues, over time, this wanton money printing will only lead to price bubbles. The Federal Reserve's "Financial Stability Report" in November last year described a worst-case outcome: In such a case, once the stable currency runs, the holders of the stable currency will panic, and they will demand the stable currency. The issuer returns the mortgaged legal currency. And because there is no transparent and reliable U.S. dollar reserve, the stable currency led by USDT has become a grenade that can explode at any time.
According to the latest data (as of the publication), the market value of USDT has reached 4.693 billion, which seems to have become the fourth largest cryptocurrency asset by market value. Despite the trust crisis of the issuer Tether and its dispute with Bitfinex, USDT still maintains the unshakable leading position in the stablecoin market.
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