Things in the stablecoin world are changing all the time.
We must change with it.
Oh My God
If there was ever a time for that thing you don’t like to read, it’s now.
Nothing you are about to see is, or is ever financial advice. I am not licensed to give that to you. You absolutely must do your own research and make the decisions which are right for you. All results, positive and negative, are your own. If you cannot adhere to this, then you should not be investing anything anywhere.
We are still in a very tentative environment when it comes to crypto, and especially stablecoins, which are the largest thread to the legacy financial system (not Bitcoin).
Not only do you have these relatively new companies themselves trying to stay compliant, you have the weight of the entire legacy system, a system that does not want to give up one drop of control, working against you as well.
Still want to have some of your money in stablecoins?
So do I. So read on.
Tiers Have Changed
I will not be having an “S Tier” this time around.
I did before, and if you want to see where I had them ranked previously, and if you want a more in-depth description of what they are, go to this older podcast episode where I lay it all out.
But we’ll start with A Tier, and go from there.
USDC – Okay, we had a legit scare here when Silicon Valley Bank went down. USDC only has about 44 million in free cash (that’s a lot for a company that really doesn’t need much at all).
Out of that 44 billion, which again is a sliver of their total assets, 3 billion of that was in Silicon Valley bank. A drop in the virtual ocean.
But this was enough to cause a panic. I was there for it. I watched it go down to $.95 and decided to make the move to Tether.
It then dropped all the way to $.87 before doing what I pretty much knew it was going to do and return to its $1.00 peg.
I don’t see anything like this happening again, but who expected this last temporary de-pegging? Nobody. So it just goes to show, even a stable who is trying to do everything right will still stumble in this environment.
But that’s why it’s not S Tier anymore. But IMO it is still the best option.
USDT – You have to hand it to Tether. This has become the stablecoin everyone wants to use now. It didn’t happen in a vacuum.
Did they do a lot of shady stuff in the past? Probably. Does it matter now? Ehhhhhhhh, they may be off the hook.
Also let me reiterate, this is likely the token the elites are using to pay people to do their dirty work, which if I’m correct would make it as bulletproof as anything out there.
100% not without flaws or potential danger in the future. But enough to move it into the A Tier.
FRAX – You have to hand it to FRAX. They’ve been quietly doing a lot right.
Very functional (I have used before), and under the radar enough to avoid the heavy hand of the SEC and its minions.
For now at least. But I’m giving credit where it’s due.
Would I hold FRAX as a stablecoin? If I had to yes, and I would be okay with it. But as long as USDC and USDT are around, and they’re not getting a lot of heat from anyone, I’ll remain there for now.
But I like having this as Option C.
USDP – Funny how the SEC went after BUSD, who is run by the Paxos company, but didn’t go after Paxos’s own stablecoin?
Or maybe simply just not in their crosshairs like Binance is.
Either way, I see it as a net positive, and a company who is also doing a lot right is still an attractive choice should the ones above it falter.
Tier C will now be known as stablecoins who are on a bit of shaky ground.
BUSD – Very good and very useful as far as its utility goes.
If I was forced to use the Binance Smart Chain for all of my DeFi and crypto transactions, I would be perfectly fine with that. The chain runs very well. Hundreds of millions of Asian people would agree.
But not only does the US government hate stablecoins, it also hates Binance, and as a result, the BUSD token has shrunk massively in market cap, and there was talk of removing it altogether.
Make no mistake, if something like this were to ever happen, you wouldn’t get rekt, they would simply migrate you over to USDT onbthe Bep20 chain in all likelyhood.
But who wants to be here over somewhere else at this point?
Not me. I’m happily taking a sit-and-wait approach on BUSD.
GUSD – Gemini’s offering did not make the tier list last time because their market cap was too small, but said market cap has grown since. And nobody is coming after Gemini at the moment.
Not the most ringing endorsement I guess, and you can only use it on their exchange, but believe it or not, it’s enough to get a C Tier ranking from me.
DAI – What is the future of algorithmic stablecoins? Can anyone guess?
It’s not looking great IMO.
Governments are typically against stablecoins which do not appear to be backed by anything (even though they are), and they will gleefully and ignorantly attack anything they don’t understand, just like we’ve seen all throughout this year.
Plus, DAI also fell when USDC did, and at about the same rate. You would have hoped the “algorithm” would have kicked in and saved it during a time of crisis, but it turns out it doesn’t.
So where’s my motivation here?
We’ll just say “D” stands for “Don’t” moving forward. Use them for their utility if you absolutely must, but then get out. Holding your USD here as opposed to anything above this tier makes no sense to me.
TUSD has fallen here, simply because of the accusations swirling around it.
AFTER PRIME TRUST BLEW UP $TUSD STAFF GHOSTED HEDGE FUNDS AND MARKET MAKERS LOOKING TO REDEEM‼️
— Parrot Capital 🦜 (@ParrotCapital) June 28, 2023
Now the comments often tried to debunk a lot of this (I couldn’t find evidence of depegging anywhere), but whether they’re true or not, ask yourself, “How badly do I really need to be here?”
And I don’t think we need to go into the rest of these. One of the stablecoins I had listed as a “don’t” from the old podcast episode, USDN, has already failed to my knowledge.
Anything below C Tier just becomes needless risk, regardless of their positives.
Stablecoins are still a good option for me to hold USD outside of the traditional banking system, if for any other reason, there’s really no other way to hold USD outside of the traditional banking system unless you want to get into bonds, and I don’t right now.
So these things matter.
And it will continue to be a cause of unnecessary stress for me going forward.
But not everything good comes easy.
There are still educated choices we must make, even in duller situations like this.
Because this evolving saga known as stablecoins is anything but dull.