My fellow retards,
These are turbulent times.
During turbulence any legitimate money manager will perform a flight to safety, which usually means selling risk on assets such as equities in favor of raising cash. Specifically, USD. This is not a US phenomenon. When global equities drop due to fear, the investors fly into the USD. The is because the USD is the reserve currency of the world.
Bitcoin, Ethereum and other crypto assets were once highly desired by money managers because they were thought to be an uncorrelated asset. Perhaps this is still the case, but not anywhere near the market’s speculation-fueled peaks.
It’s funny, there was a sweet spot in the funnel of time where asset managers fell in love with crypto. Early on they hated this novel form of drug money, then they realized they could better manage the risk/reward of a portfolio because they found some uncorrelated alpha, and now they realize that it just tracks the Nasdaq with a bit more leverage.
What happens when you jump to the dollar? Well, you signal you want safety. You’re willing to accept historic 8.3% inflation just to make sure that your investments don’t tank. What happens when you’re a crypto bro who raises dollars? You lose 50-75% of your holdings. This is not a joke, one of the largest stablecoins by marketcap just experienced a collapse of epic proportion.
There are great write-ups explaining why UST collapsed in such an epic fashion. You should read about the death spiral and tokenomics that bound LUNA to UST, it makes for quite an educational story.
Point is, dollars UST are not dollars. In a flight to safety, an algorithmic stablecoin that promises you 20% yield is not the same as storing that money in an FDIC insured account.
Dollars are different based upon which data structure they live in. Most dollars are digital. They may be digital on a decentralized blockchain such as Ethereum, or digital in your Bank of America checking account, but that does not mean they are the same.
The fine print matters.
Gemini USD for example is backed by some of the most well known financial institutions in the world. DAI is a stablecoin backed by the value of Ether. They have wildly different properties. GUSD is clearly safer and has less risk of catastrophic failure, largely because it is centralized. If you do something unapproved with your GUSD the issuers may just zero out your account, so clearly the digital dollar you choose to hold should depend on your use case and risk tolerance.
What about your dollars at Coinbase? Check out the disclosure found in their quarterly filing:
If you hold actual dollars, you’re probably relatively protected. If you hold USDC, your value may be treated as property and you’ll only get a general unsecured claim in bankruptcy.
Digital dollars make the world go round. Which ones you choose to store your wealth in matters. All kinds of digital dollars will flourish with Phonon as their transaction layer, but Phonon does not protect against their design or risk profile. You should educate yourself before you venture into stablecoin land. Or maybe you don’t have to when most of them are banned after the US government enacts new regulation to “protect” crypto users.
A keen mind and the crew at Phonon DAO are all the protection phon/ongod needs.
Tips to phonongod.eth will be invested in bounties that advance the Phonon project.
Hatemail to phonongod@protonmail.com will be scathingly considered.
Targets for the marketcap of PHONON DAO remain:
$1b by Q2 2022, $12b by EOY.
On the high end, $300b marketcap in 3 years.