How to Trade with Stablecoins Properly?

Discussion in 'Crypto Assets' started by Saigyou_123, Dec 7, 2021.

  1. Like many people, I am concerned that Tether may collapse one day in a bank run.

    However, when trading on Binance, there aren't many good alternatives for holding my money when not trading (e.g. when I cash out for the day). The stable half of most available trading pairs is in Tether. Even if a trading pair with some other fiat currency or stablecoin is available, usually the liquidity is not that good.

    For the time being, I keep money that I do not use for trading in USDC. As an example, in the last short while, I had around 80% of my money on Binance in USDC. I kept the remaining 20% in Tether to trade MATIC. After I was done trading each day, I would convert the Tether into USDC for safekeeping. This ended up costing me quite a bit of commission. Also, the USDC-to-Tether rate fluctuated continuously, which added to my distress.

    For those of you, who trade cryptos (rather than HODL), what is your strategy to resolve this issue?
    shuraver likes this.
  2. NoahA


    With KuCoin, they have some trading pairs with USDC, but only BTC, ETH, XRP and ADA are the big ones. The other option is Kraken exchange which lets you hold USD. I'm sure there are a few more that will let you hold USD.

    I agree that fees to have to exchange twice is a horrible way to do this.
  3. Are you similarly concerned that Tether may collapse one day in a bank run?
  4. RedDuke


    not if, when. But who knows, they might be able to keep this fraud running forever. Last weekend they stopped crypto fall by printing 2 billion. I think 1 went to FTX.
  5. Sig


    While you're right to worry about a bank run on stablecoins, what you really have to ask yourself is if any alternative wouldn't suffer the same fate when the meltdown happens. Even if you nominally had your money in USD, is the entity your money is with actually going to be in a position to deliver you those dollars when the stablecoin ponzi scheme implodes? Any illusion of safety we have with one product over another is probably just that, an illusion.
    RedDuke likes this.
  6. NoahA


    Some of these exchanges have protections through the government. Now granted, the insurance amounts they hold are very low, so perhaps they don't have enough to pay out everyone, but that is precisely why it perhaps may never blow up. The government can always print after all. Its a heck of a lot better holding USD and hoping the government makes you whole than having zero protections.
  7. Sig


    I question if that actually covers this situation. When I read up on it, there seems to be a lot of clever word use that actually doesn't say what it leads us to think it says. For example, Binance.US states that they hold their USD deposits in a pooled account at a bank that is covered by FDIC. Not that Binance.US is covered by FDIC, it couldn't be since it isn't a bank. It's just the bank where they hold their USD deposits is FDIC insured. Same could be said for literally any company in the U.S. that has a bank account, but none of the rest of us try to imply that means FDIC is insuring us. The FDIC insurance of the bank, of course, means nothing when Binance.US implodes, it only means FDIC would pay out if the bank where they hold their USD deposits implodes. FDIC insured banks hold accounts for companies that go bankrupt every day, the fact that the company holding an account at that bank went bankrupt doesn't create a payable event for FDIC to bail out that company.

    Same thing here, if Binance.US implodes, the fact that they have accounts at an FDIC insured bank means nothing except that Biance.US knows they as a company will have access to those funds. I'm pretty sure we as customers of Binance.US are at the bottom of the unsecured creditor stack and in the event of a bankruptcy get pennies on the dollar if that.
    NoahA and RedDuke like this.
  8. There is always a risk that tether will crash, so if you want to trade it then you have to bear a risk that something will happen. Either that or just simply hodl most of your crypto and trade a small portion so if the even that tether crashes and you are holding it it wont be the end of the world.
  9. FTX also allows USD and is pretty liquid.
    NoahA likes this.
  10. Sig


    If tether crashes, do you think the crypto you're holding will be unaffected? Correlation coefficients aren't your friend here!
    #10     Dec 7, 2021