Comment by Dylan16807
4 days ago
It makes the current market price irrelevant because you're still owed the same amount on the same date.
4 days ago
It makes the current market price irrelevant because you're still owed the same amount on the same date.
The current market price is about what it is worth _currently_.
When your deposits are denominated in _current_ dollars, and that's what your customers can demand, then it doesn't matter that your expectation of how many dollars you are going to receive in 2035 is stable. It's about what our assets are worth right now, in case you need to liquidate them to satisfy withdrawal requests.
If you can contrive your deposits to be denominated in 2035 dollars, then long term treasury bonds are 'stable' in that sense.
Similarly, if your deposits are denominated in grams of gold, then gold is a stable backing for those.
If you have a mismatch between what you owe and what you own, then you need a thick equity cushion between your assets and fixed liabilities.
This conversation was not about banks when the comparison came up, and when I talk about long term value I'm not talking about bank reserves. (And even if you argue a stablecoin is like a bank, it's one with an utterly massive reserve ratio.)
If you're worried about short term value then you can use shorter term bonds if you want, whatever. It doesn't make a difference to the reason I brought it up in the first place, because either option is more stable than gold.
What do you mean by long term value? The current market value is typically the best estimate we have for their long term value.
No one is talking about bank reserves. I'm talking about assets.
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