What happens if a stable coin is in high demand? - page 2.

jaysabi

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Quote from: Vaccaria on August 27, 2018, 11:01:14 PM

A stable coin is any cryptocurrency pegged to a stable asset, such as gold or fiat currencies. In theory, a stablecoin will remain constant in price, as it is a representation of a known amount of an asset.

My question is: Does a stable coin have a set total coin supply? Or does it have to be able to create and destroy based on the demand?

The image in my head goes like this:
A stable coin pegged to a currency started off its business saying it would have a coin supply of $5 billion. Everything works well until one day, the crypto market goes south and everyone rush to buy the stable coin. The coin is unable to sell to everyone because the demand for the coin is too high, so some people are left out.

Please correct me my misconception Cheesy

The problem with a stable coin is that there has to be a bank or reserve of the asset the coin is pegged to so that people can redeem the coin for the asset. The ability to redeem it for a set value of the other asset is what gives the coin a stable value. If some coin has a $5 billion valuation backed by dollars, there has to be $5 billion dollars in reserve to exchange for anyone who wants to trade out. The first problem is amassing the enough of the asset to peg the coin to it. Also, pegging the coin to dollars should theoretically limit the upside of buying the coin, even if demand spikes, because the most you are guaranteed to get out of owning the coin is the same amount of dollars in the pegged value, so it's it entirely seems pointless to try and trade a pegged coin for profit.

Reid

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It should not be going with the flow of the crypto market.
Nothing can be stable when it is leaning at it.

Independence. It should make its own price.
5 billion coins is in your example and I think that should be enough if the price per coin will be higher before it stabilize.

Acsirp

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Any coin or stable coins in the market which are currently in demand would really take the high price value of that stable coin, and much more it will rise up if the supply in the market is fewer in quantity, if the volume is more of quantity still it get a higher price because of a certain demand of that coin.

shield132

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Quote from: Vaccaria on August 27, 2018, 11:01:14 PM

A stable coin is any cryptocurrency pegged to a stable asset, such as gold or fiat currencies. In theory, a stablecoin will remain constant in price, as it is a representation of a known amount of an asset.

My question is: Does a stable coin have a set total coin supply? Or does it have to be able to create and destroy based on the demand?

The image in my head goes like this:
A stable coin pegged to a currency started off its business saying it would have a coin supply of $5 billion. Everything works well until one day, the crypto market goes south and everyone rush to buy the stable coin. The coin is unable to sell to everyone because the demand for the coin is too high, so some people are left out.

Please correct me my misconception Cheesy

This one, in Bold. Stable coins have to be created and destroyed when you buy and sell them. As far as I know there is no such coin but this version almost seems like a dream. Imagine you want to get rid of any unwanted actions from bank and keep your funds secure in virtual world, buy and sell without trace and keep anonymity, imagine second Monero with fixed price and changeable demand.

darkangel11

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Quote from: Ozero on August 29, 2018, 12:06:02 PM

Quote from: davis196 on August 28, 2018, 07:01:15 AM

Your question is pointless,because a coin with a stable price will never have high or increasing demand.
The price volatility and the possibility for the price to do up is what drives the market demand for a particular asset.I don't see any altcoins with a stable price.Tether is the only example,but I don't think that this is a real
cryptocurrency.Tether is fake crypto. Grin

I absolutely agree with you. Decentralized crypto currency can not have a stable price due to its high volatility by nature. Now they are trying to create tokens linked to gold (ICO Jinni project), others are to diamonds, but so far it is unclear what will come of it. Meanwhile, I do not believe in a stable currency.

Since you guys agree let me ask you this. A coin has a stable price due to it having limited supply and being widely accepted. Think Bitcoin in 20 years. I believe that if it continues to exist 20 years from now it will be relatively stable. Suddenly a war begins, wouldn't it surge? Same thing is happening with som many stable fiat currencies that become unstable once the shit hits the fan.
So yea, iI believe that a stable coin can suddenly go into a crazy rally. The question is pointless though. If there's a sudden high demand a stable coin becomes unstable, that's it.

Ozero

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Quote from: davis196 on August 28, 2018, 07:01:15 AM

Your question is pointless,because a coin with a stable price will never have high or increasing demand.
The price volatility and the possibility for the price to do up is what drives the market demand for a particular asset.I don't see any altcoins with a stable price.Tether is the only example,but I don't think that this is a real
cryptocurrency.Tether is fake crypto. Grin

I absolutely agree with you. Decentralized crypto currency can not have a stable price due to its high volatility by nature. Now they are trying to create tokens linked to gold (ICO Jinni project), others are to diamonds, but so far it is unclear what will come of it. Meanwhile, I do not believe in a stable currency.

virendarnagpal

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I am of the opinion that if the demand is high and it is rising the coin can not remain stable. There are traders who are watching all entire market. Immediately they will attack that place and drive the market and its price for their benefit.
So if the demand is high naturally it means as a result the price will move upward.

v3liana

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Quote from: Vaccaria on August 27, 2018, 11:01:14 PM

A stable coin is any cryptocurrency pegged to a stable asset, such as gold or fiat currencies. In theory, a stablecoin will remain constant in price, as it is a representation of a known amount of an asset.

My question is: Does a stable coin have a set total coin supply? Or does it have to be able to create and destroy based on the demand?

The image in my head goes like this:
A stable coin pegged to a currency started off its business saying it would have a coin supply of $5 billion. Everything works well until one day, the crypto market goes south and everyone rush to buy the stable coin. The coin is unable to sell to everyone because the demand for the coin is too high, so some people are left out.

Please correct me my misconception Cheesy

Well its true that stable coins seems like a gateway to wait the market dip and then buy again. But i do think it doesnt matter and not affecting the price so much. Doesnt mean people would just leave and doesnt mean all people will follow to dump their coins. I believe there is a buyer and there is do a new people enter crypto everytime the price going down so i dont agree with your theory and its too hard to have a proof about that.

wuvdoll

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I don't know how we can call bitcoin a decentralized coin when we can just print out tether like crazy and buy bitcoins or whatever we want with it and than call it different than regular bank controlled dollar or euro ?

I mean if we can just print tether whenever we want, than we can simply just print out 100 trillion tether today and buy as many bitcoin as we can and spike the price of bitcoin to insane amounts and than call bitcoin successful, that doesn't make us any different than 2008 banking crisis where they print out 800 billion dollars. We should try to limit stable coins and their owners trying to adjust the price by hand, people should be doing that themselves looking at the value of it, not the other way around.

gambitcoin53

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Quote from: Vaccaria on August 27, 2018, 11:01:14 PM

A stable coin is any cryptocurrency pegged to a stable asset, such as gold or fiat currencies. In theory, a stablecoin will remain constant in price, as it is a representation of a known amount of an asset.

My question is: Does a stable coin have a set total coin supply? Or does it have to be able to create and destroy based on the demand?

The image in my head goes like this:
A stable coin pegged to a currency started off its business saying it would have a coin supply of $5 billion. Everything works well until one day, the crypto market goes south and everyone rush to buy the stable coin. The coin is unable to sell to everyone because the demand for the coin is too high, so some people are left out.

Please correct me my misconception Cheesy

simply applies the law of supply and demand, if a coin has a limited supply but the demand is high, it tends to increase in price, therefore not stable, if a coin has low demand, means it has plenty of supplies in the market, means no one is buying it, therefore unstable too, a stable coin has plenty of supplies and the demand is also high, volatility is the major issue here, the fast paced trading due to high demand and also growing supplies because of mining and panic selling on the market are the culprit.

cahbagus555

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Quote from: Vaccaria on August 27, 2018, 11:01:14 PM

A stable coin is any cryptocurrency pegged to a stable asset, such as gold or fiat currencies. In theory, a stablecoin will remain constant in price, as it is a representation of a known amount of an asset.

My question is: Does a stable coin have a set total coin supply? Or does it have to be able to create and destroy based on the demand?

The image in my head goes like this:
A stable coin pegged to a currency started off its business saying it would have a coin supply of $5 billion. Everything works well until one day, the crypto market goes south and everyone rush to buy the stable coin. The coin is unable to sell to everyone because the demand for the coin is too high, so some people are left out.

Please correct me my misconception Cheesy

In my opinion, stable coin like USDT if always printed because peoples demand, its will increase others coin price. Supply on USDT increasing but supply on bitcoin or others coin not change

jhony525525

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If a stable coin demand rise then the value and price will automatically rise and in this way it will get much attention in the market while to hold this kind of coin is a good way to sell at high price.

pinkflower

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Quote from: admosfir on August 28, 2018, 04:11:44 AM

i think the stable coin always has fixed supply, so, the coin can't be created and destroyed based on the demand

Wrong, a stable coin should have an uncapped supply so the issuer can pour more on the market in times of high demand to be sure that the price of the coin is the same as the price to the asset its backing. In periods of low demand the issuer should be buying the coin themselves for the same reason.

h0lybyte

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Till the moment i have seen only one stable coin in market and that is USDT. It is a representation of know fiat USD, its price follows constantly the fiat value.
The demand of this coin seems quite well, even price is not expected to rise 2x but if you are looking for a stable coin then USDT is the same coin

vit05

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Tether is just a token that is printed according to demand. Since it has parity with the dollar, in theory, it is very difficult to have an inflationary power. But it should be regarded as a temporary solution. Who has stability is the dollar. So if it's in too much demand, just print more. Today it is already one of the tokens with the largest marketcap.

The collateral of the tether is supposedly a bank account in Costa Rica with many dollars.

Some others like the DAI have a complex system of weights and stabilizers to always have the same value of 1 dollar. You can read more here as it is a very complex subject.
https://medium.com/cryptolinks/maker-for-dummies-a-plain-english-explanation-of-the-dai-stablecoin-e4481d79b90

Vaccaria

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After reading all your replies, I still don't gain much understanding on how a stable coin functions. I'll lay out what I know below.

#1. A "stable" coin pegs its value to either a fiat currency, or precious metal like gold.
So that means it's price is not affected (or at least not affected much) by the market's demand?

#2. From my initial understanding + the replies so far: A stable coin can create and destroy based on the demand.

So, with those two assumption in mind...

When the demand is high:
A stable coin buys fiat currency/metals to hold. By doing so, it will have more value than before. With the increase in value, it can creates more coins, up to a point where each coin will have the same value as the fiat/metal it is pegged to.

Did I get it wrong?

Another thing I noticed from the replies is that some are sceptical of a coin whose value doesn't change. "How will you profit from it?"
From my understanding so far, people will use a stable coin to "store their investment's worth" when the market is not going the way they want it.

Ucy

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Quote from: Vaccaria on August 27, 2018, 11:01:14 PM

My question is: Does a stable coin have a set total coin supply?

I haven't gone to through the technical details of any stablecoin but I do not think they need to have limited supply...it is counterintuitive. No fiat has limited supply, I think? so why would stablecoins

Limited supply normally cause something to increase in value. Or scarcity causes the price of something to increase.. which is why Bitcoin and most Cryptocurrencies have limited supply.

jrrsparkles

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Well, don't worry it will never happen in the crypto market because it is just a useless shit coin used for trading pairs only and if the demand increases there will be no changes in the price of its and also other coins.Honestly people are not interested in stable coins since we cannot make money with that.

ShitTL

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If a coin is stable but they have high demand they will quickly be invested by many investors and they will quickly get good prices and many exchanges will quickly accept them for trading on the floor.

Mr.grin

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Well, I think it's very difficult to think of the stability of a coin that is meant. because basically they or investors will indeed invest in stable coins, but that doesn't mean the price won't increase. we say that gold is a stable investment, it's because the price is always rising, because of that, we say it's stable. but, I think people won't invest in things that are fixed. if a coin has a lot of demand in the future, I think it certainly will greatly affect the price.

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