Question: are Stablecoins subject to https://en.wikipedia.org/wiki/Gresham%27s_law and network effects will see consolidation to 3-5 stables and the rest having a redemption discount?
Looking over the past, banking runs (financial panics) are inevitable, cf Asian crisis, S&L, Terra/Luna. Not all stablecoins have access to a lender of last resort so there is the trilemma between stability, liqudity (free flows) and independent monetary/inflation policy. Read https://a16zcrypto.com/posts/article/how-stablecoins-become-money/
great argument. I think that stablecoins is a winder-takes-most market. We'll see consolidation around a few stables with the highest liquidity and availability.
the problem (and opportunity) is unbundling the risks - monetary inflation vs fiscal payment (rails). If you look carefully at the legal mumbo-jumbo, some of the niche tokens are actually receipts or vouchers, not really redeemable at par much less legal tender. For example USTC redemption has a lower limit of $100k from memory which means only mainstream banks/fintech can knock on door and insist on legal tender.
My conjecture is that without some market discipline, some idiot a few years later will experience a reserve impairment and in panic run to the Fed and there's a non-zero chance they'd be turned down, leading to cascading unwinding ...
Question: are Stablecoins subject to https://en.wikipedia.org/wiki/Gresham%27s_law and network effects will see consolidation to 3-5 stables and the rest having a redemption discount?
Looking over the past, banking runs (financial panics) are inevitable, cf Asian crisis, S&L, Terra/Luna. Not all stablecoins have access to a lender of last resort so there is the trilemma between stability, liqudity (free flows) and independent monetary/inflation policy. Read https://a16zcrypto.com/posts/article/how-stablecoins-become-money/
great argument. I think that stablecoins is a winder-takes-most market. We'll see consolidation around a few stables with the highest liquidity and availability.
the problem (and opportunity) is unbundling the risks - monetary inflation vs fiscal payment (rails). If you look carefully at the legal mumbo-jumbo, some of the niche tokens are actually receipts or vouchers, not really redeemable at par much less legal tender. For example USTC redemption has a lower limit of $100k from memory which means only mainstream banks/fintech can knock on door and insist on legal tender.
My conjecture is that without some market discipline, some idiot a few years later will experience a reserve impairment and in panic run to the Fed and there's a non-zero chance they'd be turned down, leading to cascading unwinding ...
well isn’t all flowers