Stable coins vs Alt coins?

**disneysteve** · 12-08-2021, 05:29 PM

I wasn't familiar with the term so I looked it up and found this article from just a couple of days ago. It gives a nice explanation of what stablecoins are and why they are increasingly popular.

What Are Stablecoins and Are They Less Risky? The Details Crypto Investors Should Know

https://www.cnet.com/personal-finance/crypto/stablecoins-what-they-are-how-they-work-and-how-to-buy-them/

Stablecoins are different from other cryptocurrencies. Here's what to know about the "poker chips" of the crypto world.

**Wolf_278** · 12-09-2021, 06:17 AM

I have some of my savings in stable coins for the interest. I currently get between 8-10% depending on the exchange for my stable coins. Stablecoins are more likely to stay at $1.00 and therefore the risk of losing it all isn't as bad as putting it into other crypto and watch it all disappear. But again that's just why I do it.

**myrdale** · 12-09-2021, 06:53 AM

This one has me a bit confused. From what I gather, the value of a stable coin is tied (pegged) to a real asset USD, gold, silver, beaver hides. I understand the concept (not the logic) of having a stock in gold. I think this is closer to when the USD was on the gold standard.

**disneysteve** · 12-09-2021, 08:32 AM

Originally posted by Wolf_278 View Post

I have some of my savings in stable coins for the interest. I currently get between 8-10% depending on the exchange for my stable coins.

I’ve seen this mentioned before. How is the entity behind this generating such a high return in today’s environment? To be paying 8-10%, they must be making 11 or 12% or more. What are they doing with your deposits that allows them to pay you so much interest?

This really seems like it’s in the “if it seems too good to be true” category. Obviously we’d all love to be earning 8% or more but what’s the risk side of this deal?

**QuarterMillionMan** · 12-09-2021, 09:27 AM

8% - 10% sounds like a Bernie Madoff type of scam. Crypto dot com which pays 12% on USDC coin is the new sponsor of the Staples Center in Los Angeles. I'm not saying Crypto dot com is reputable but something I will be looking into. Wolf may be on to something.

**QuarterMillionMan** · 12-09-2021, 09:42 AM

This is the search I used which explains earning interest on cryptos (I haven't had time to read it thoroughly).

USD Coin Savings Interest Rates | Bitcompare

**QuarterMillionMan** · 12-09-2021, 10:43 AM

After watching some You tube videos I get the gist of it now. It is like a crypto savings account where you deposit cryptos for a length of time and get paid interest on your cryptos. As for crypto dot com it is China based and now I see why NBA is working with them to replace Staples Center in Los Angeles. The NBA is in bed with China. I don't trust China. Some other network names I came across are Celcius, Gemini (I think only for New Yorkers), Voyager, Block Fi, etc.

**james.hendrickson** · 12-09-2021, 10:47 AM

I don't have anything substantive to add, other than that I love this thread.

**QuarterMillionMan** · 12-09-2021, 12:36 PM

**disneysteve** · 12-09-2021, 01:13 PM

I don't doubt that it's true. I just wonder how it's possible. How can they pay 9.5% or 6.25% interest? What are they doing with your money to make that possible? They're certainly not putting it in T-bills.

**kork13** · 12-09-2021, 01:29 PM

Originally posted by disneysteve View Post

I don't doubt that it's true. I just wonder how it's possible. How can they pay 9.5% or 6.25% interest? What are they doing with your money to make that possible? They're certainly not putting it in T-bills.

That's the beauty of crypto-based fintech firms -- regulations haven't caught up with the market. There's few restrictions on what they can do with their "deposits." Because in the eyes of banking & investment regulators, these aren't actually "deposits" -- technically, it's roughly the equivalent of investment capital. Which means they can do just about anything with it.

**james.hendrickson** · 12-09-2021, 01:31 PM

Originally posted by kork13 View Post

That's the beauty of crypto-based fintech firms -- regulations haven't caught up with the market. There's few restrictions on what they can do with their "deposits." Because in the eyes of banking & investment regulators, these aren't actually "deposits" -- technically, it's roughly the equivalent of investment capital. Which means they can do just about anything with it.

Ah...unregulated markets...so dynamic yet so risky.

**disneysteve** · 12-09-2021, 01:36 PM

Originally posted by kork13 View Post

That's the beauty of crypto-based fintech firms -- regulations haven't caught up with the market. There's few restrictions on what they can do with their "deposits." Because in the eyes of banking & investment regulators, these aren't actually "deposits" -- technically, it's roughly the equivalent of investment capital. Which means they can do just about anything with it.

So what does that mean? When I put $5,000 into one of these accounts, how are they paying me 9.5% interest? Where are they investing my 5K to earn them enough to pay me that much interest and still make a profit for themselves?

**kork13** · 12-09-2021, 01:44 PM

Originally posted by disneysteve View Post

So what does that mean? When I put $5,000 into one of these accounts, how are they paying me 9.5% interest? Where are they investing my 5K to earn them enough to pay me that much interest and still make a profit for themselves?

You name it. My best guess: maybe pooling money from a bunch of people & investing in new companies. If those investments are in the form of loans, interest rates would be anywhere from 6-15% (or more). If they hold equity or royalty positions, then Mr. FinTech gets a chunk of the company's profits...and if done well, those investments can see returns anywhere from 20% up to (and beyond) 200%.

Stable coins vs Alt coins?