Stablecoins: Unstable by Nature

BIS Study Reveals Stablecoins Struggling to Fulfill Promise

Stablecoins not living up to expectations, say BIS researchers.

Have you heard the term “stablecoins”? They sound like the superheroes of the digital asset world, swooping in to save the day with their trusty pegs to assets like the U.S. dollar. But hold on to your hats, because economists and analysts at the Bank for International Settlements have a bone to pick with these so-called stablecoins.

In a report published on Wednesday, the international organization made a bold claim: “Not one of the stablecoins assessed in this paper has been able to maintain their closing prices in parity with their peg.” Those swaggering stablecoins couldn’t even live up to their own names! It’s like calling a turtle “Speedy” or a sloth “Usain Bolt.”

Now, some people have touted stablecoins as an alternative form of payment. But let me tell you, if they want to be the “Blocking.Net of exchange,” they’ve got to do better than just maintaining their peg during the day. The report called them out on their inconsistency in this area – apparently, they flounder more than a fish out of water.

The paper looked at stablecoins such as Pax Gold, USD Coin, and Tether, to name a few. It also didn’t forget to mention the infamous collapse of Terra’s algorithmic stablecoin UST, which shook the crypto market and caused losses galore last year. It’s like when Godzilla stomps through a city, leaving destruction in its wake.

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But the trouble doesn’t stop there. The report expressed concerns about the lack of transparency surrounding the reserves that back these stablecoins. You see, trust is key here. If people can’t have faith in the credibility and ability of stablecoins to maintain their peg, it’s like telling them to trust a squirrel with their savings. It’s just nuts!

And if that wasn’t enough, Moody’s Analytics chimed in with an article on Monday that revealed how fiat-backed stablecoins decided to depeg – and lost their par with the asset they were pegged to – a whopping 609 times this year alone. That’s like a wrecking ball repeatedly smashing through a delicate glass house.

So, what’s the takeaway from all this instability? It’s clear that stablecoins are not the rock-solid heroes we thought they were. They may promise stability, but in reality, they’re about as stable as a unicycle on an icy tightrope. Investors, beware!

Now, dear readers, I want to hear from you. Have you had any experiences with unstable stablecoins? Were you left hanging by their failure to maintain their pegs? Share your tales in the comments below, and let’s commiserate together!

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