Stablecoins? More Like Tokenized Hedge Funds
Crypto’s recent sell-off revealed a less stable side to the future of money.
Stablecoins are supposed to be stable. If these virtual dollar tokens are emerging from the shadows of cryptocurrency trading into mainstream finance, it’s because they’re backed by real assets, exchangeable for real dollars and hold their dollar or euro peg while delivering what advocates say is seamless transfer of value.
But not all stablecoins are created equal — and not all have been tested by a serious downturn — as shown in last Friday’s tariff-driven crypto selloff. As leveraged bets worth $19 billion were unwound and volatile altcoins sank to near-zero amid a dash for cash, the third-largest stablecoin – USDe – briefly lost its dollar peg and fell to as low as 65 cents against the dollar on crypto exchange Binance. Things have calmed down since then, but it’s clear that this is not the kind of move investors expect of so-called digital dollars.