Leading stablecoins didn’t live up to the name this weekend, as a banking crisis rattled the cryptocurrency sector. Can you trust them in the future? Stablecoins are digital currencies designed to maintain a stable value against a reference asset, such as the U.S. dollar. However, a rash of bank liquidations in and around the crypto market is shaking up these supposed models of safety and stability. Can those supposed paragons of digital steadiness be trusted in the long run? Let’s think about that.
The sudden liquidations of Silvergate Capital (SI -2.27%), Silicon Valley Bank (SIVB -60.41%), and Signature Bank (SBNY -22.87%) sent immediate ripples through the cryptocurrency market. Dollar-based stablecoins are taking this crisis on the chin, drifting far away from their intended price of $1 per token. Stablecoins are meant as a reliable and predictable alternative to other cryptocurrencies, which are often known for their volatility. But recent events have demonstrated that even stablecoins are not immune to market forces. The price of USD Coin (USDC -0.44%) fell as low as $0.88 in the early morning hours of Saturday, March 11. Sector leader Tether (USDT -0.06%) briefly rose to $1.02 last Thursday. These moves may not sound like much, but they are massive system shocks in the context of a stablecoin’s long-term firmness. The weekend’s chart squiggles are pretty blatant, to misquote punk rock legend Glen Matlock:
Full opinion : Unstable Stablecoins: The Cryptocurrency Paradox.
