Re:Another stablecoin loses peg – DEI team working to restor...
by whimsicalism on Friday May 20, 2022 @05:45PM
(#31452911)
... no. The price of Ethereum in USDC is irrelevant. There is no arbitrage to be had. If the price of USDC falls, you have to spend more and more USDC to mint one Dai because Dai is tied to the price of the dollar, not USDC.
Explain to me how you arbitrage USDC falling out of Dai?
I really encourage you to read up more on this. There are real risks that come with Dai as a stablecoin (including eth or USDC collapsing very quickly) but they are not the risks that you are identifying.
Re:Another stablecoin loses peg – DEI team working to restor...
by boc on Monday May 23, 2022 @08:58PM
(#31486783)
My background is in international finance, and therefore when I promise you that DAI cannot defend a virtual peg without holding large amounts of actual underlying US treasuries or physical USD, I'm only making that promise because it's been true for every currency that has ever attempted to maintain a peg with the US dollar. Maybe it's "different this time" but I sincerely doubt it.
I likewise encourage you to think about this from first principles and read up on the mechanics of a currency peg. You MUST be able to quickly sell T-bills on the market swiftly to defend your currency peg, otherwise you will see your currency break from the pegged range. DAI is shifting the reserves from directly holding USD or T-bills to holding USDC instead, which isn't the same thing as USD and WILL cause problems for DAI.
Exchanges respond by sealing themselves off to protect their $3000 ETH from the $6000 fake ETH trade prices, thus creating a massive freeze in the market, thus wrecking the redemption system that underpins DAI.
It's very, VERY important to realize that all of these things are interwoven. There's no such thing as "USDC collapsing" without it also taking all the crypto traded on Coinbase with it.