RE: My Thoughts on Creating a Bitcoin Fund From DHF to Partially Insure HBD Pegging
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Because bitcoin is pristine collateral in the crypto verse, and soon probably in the mainstream area.
Not with volatility. When looking at how the lending world works, especially short term, when something is volatile, it is crap collateral.
Would you want to make a loan against collateral that could drop 10% in a day or two?
As for the backing, it truly isnt. This is more putting it in the general Treasury. I know it was slated as a backing, but I am not sure the idea of paying out in BTC if the peg drops to low is even possible. As Smooth pointed out, there are technical issues at every level.
However, the focus needs to be upon the idea of making HBD the stable asset and then collateralizing off that. Instead of using something else for our purposes, we do it ourselves.
The "golden nugget" of stablecoins, my latest articles describes how we go about that.
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On bitcoin becoming or not pristine collateral in the future, on the short term it's not possible, because of the volatility. But on the medium-long term, I believe that's a good collateral.
As a backing, bitcoin is obviously not pegged. Whether or not the idea to have a bitcoin fund to sell from practically in a dropping market to bring HBD back above the peg makes sense or not, I'm not entirely sure. It seems smarter to have it as a treasury fund, if there is no risk of losing the peg of HBD for a medium-long term.
I totally agree with that. One problem is that we have too few of them.
Which also hurts the peg since volatility is introduced in a larger way than we prefer.
We will have to see. Gold is a $10 trillion market cap and it still has a degree of volatility to it that cannot be overlooked. Of course, I believe Bitcoin, if it does move into the collateral realm, could end up with a $30T-$40T market cap. At that point, volatility, I would think, would be much less. That could open it up in being attractive.
The challenge is the elasticity. With it capped in number, it would make it a challenge to expand and meet the needs of the market. This is why fixed is not what the financial system needs, something the Bitcoin maxis miss.
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Yes, that's indeed a problem that is hard to overcome at high scale.