Your best summer reading
This is the book I wish I had written.
To buy it, click here.
I’m very afraid of stablecoins
I’m tempted to short the big player in the field:
Using stablecoins is sort of an alternative to bank wiring and ACH.
These are stablecoin’s advantages, courtesy Circle’s web site:
I’ve spent hours reading about them. There’s a helluva lot about them on the Internet.
I like Chatgpt:
What Are Stablecoins?
Stablecoins are a type of cryptocurrency designed to maintain a stable value by pegging them to an underlying asset, usually a fiat currency like the U.S. dollar, or sometimes commodities like gold. The idea is to avoid the extreme volatility that most cryptocurrencies like Bitcoin or Ethereum experience, making stablecoins more suitable for everyday transactions, savings, or as a store of value.
There are three main types of stablecoins:
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- Fiat-Collateralized Stablecoins: These are backed 1:1 by a fiat currency. For example, 1 USDT (Tether) or 1 USDC (USD Coin) is supposed to be backed by 1 U.S. dollar held in reserve.
- Crypto-Collateralized Stablecoins: These are backed by other cryptocurrencies, but they usually over-collateralize to account for price volatility. For example, DAI is a crypto-collateralized stablecoin that uses Ethereum as collateral.
- Algorithmic Stablecoins: These are not backed by any collateral. Instead, they use algorithms and smart contracts to control the supply and demand, adjusting the total supply of coins to keep the price stable. Examples include Terra (LUNA) before it collapsed and Ampleforth (AMPL).
Are Stablecoins Safe?
Safety Concerns
While stablecoins aim to provide stability, they are not without risks. Let’s break down some of the key safety factors:
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- Pegging and Reserve Issues:
- Fiat-collateralized stablecoins like Tether (USDT) and USD Coin (USDC) claim to be backed 1:1 by fiat reserves. However, there have been concerns about whether they hold enough assets in reserve, and whether the reserves are being audited regularly and transparently. If a stablecoin issuer fails to maintain proper reserves, its value might fall below its peg.
- Counterparty Risk:
- The safety of fiat-collateralized stablecoins depends on the issuer of the coin. If the issuer (e.g., Tether or Circle) goes bankrupt, mismanages reserves, or faces regulatory issues, the value of the stablecoin could be affected.
- Smart Contract Risk (Crypto-Collateralized Stablecoins):
- If the stablecoin relies on smart contracts (like DAI), bugs or vulnerabilities in the code could allow hackers to exploit the system or lead to unintended behavior. These risks can be mitigated with audits, but they never fully go away.
- Algorithmic Stablecoins:
- These are perhaps the riskiest since they are not backed by any collateral. If the algorithm or mechanism that controls the supply and demand of the coin fails, it can cause the coin’s value to deviate from its peg. The most famous example of this is the Terra (LUNA) collapse in 2022, where the TerraUSD (UST) algorithmic stablecoin de-pegged, resulting in billions of dollars in losses.
- Regulatory Risks:
- Stablecoins are coming under increasing scrutiny from regulators worldwide. Governments may impose new rules or restrictions that could affect the ability to use or issue stablecoins. For example, the U.S. is looking into whether stablecoin issuers should be regulated like banks.
- Market Manipulation:
- While stablecoins are supposed to maintain a stable value, in some cases, large investors or institutions may be able to manipulate the price temporarily, especially if the stablecoin is less liquid or the market for it is less deep.
- Pegging and Reserve Issues:
Are Stablecoins “Safe” for You?
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- For Everyday Use: If you’re just using stablecoins for things like trading, transferring funds, or as a temporary store of value, they tend to be safer than more volatile cryptocurrencies. However, always ensure you use reputable, well-established stablecoins like USDC, Tether (USDT), or DAI, and be aware of their specific risks.
- For Long-Term Holding: For long-term storage, stablecoins are usually less risky than volatile assets, but they still carry risks, especially with regulatory uncertainty and market manipulation potential. If you’re holding stablecoins as part of a larger portfolio, it’s good to stay updated on the state of the reserves and the health of the issuer.
Mitigating Risk
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- Check Reserve Audits: Reputable stablecoins like USDC and DAI provide regular audits of their reserves to ensure they are adequately backed. It’s essential to check the transparency and audit reports.
- Diversify: Don’t put all your eggs in one basket. It’s a good idea to diversify your holdings if you’re using stablecoins for savings or a hedge.
- Regulatory Updates: Stay informed about potential regulatory changes in your country and globally, as these could affect the value or legality of certain stablecoins.
- Security Practices: Use secure wallets and exchanges that offer strong protection for your assets. Always follow best practices for storing and safeguarding cryptocurrencies.
Google told me:
In essence, stablecoins have the potential to democratize finance, promote financial inclusion, and streamline transactions globally, while also providing stability within the often-volatile crypto ecosystem. However, it’s crucial to acknowledge the associated risks, including potential de-pegging, regulatory uncertainties, and the need for robust reserve management and transparency.
In other words, it smells like the next financial blowup. I just don’t get it. Except it is good hype.
Oh, by the way, Fidelity shows Circle’s P/E as 262.80. Yahoo Finance shows it at a lofty 2081.44.
The joys of satellites
+ Starlink is great Internet service for your broadbandless house, your RV and camping/travels. Starlink has a variety of antenna and service plans. A PCMag reporter wrote “I’ve Spent $6K on Starlink Internet So Far. Here’s Why It’s Worth Every Penny:
SpaceX’s satellite service isn’t cheap, but in my patch of rural Idaho, it’s by far the best way to get online. And over my three years using Starlink, it’s become much faster and more reliable—my long-term testing proves it.
I’ve used Starlink in Montana. It worked perfectly.
Starlink will be a hot IPO and Elon will get even richer and crazier
+ When I lost cell service service on my T-Mobile iPhone recently, it automatically switched to satellite service and I could receive and send text messages. It was truly amazing. The phone told me to go outside and point to the sky and line it up with moving satellite image on my phone. Outside my down-the-line backhand winner, I’m rarely impressed. But this satellite texting was really impressive.
Dollar Savings Tips
+ Intel has — finally — made a much, much faster laptop chip. It’s now powering the laptop I use every day — called the ThinkPad X1 Carbon. The new one called the Aura Edition is lighter and faster. It has the best keypad and now the best trackpad. I’m really impressed. Buy one from Lenovo.com. Buy it with the fastest processor, the most RAM memory and the biggest hard drive. That way you’ll get years of wonderful work. Better yet, if you run your life on your laptop. buy two. Just in case. I’ve always felt laptops are among my useful tools. In fact I’ve been watching Wimbledon on my X1 Carbon laptop using YouTubeTV. It’s better than real TV.
+ Business class airfares have dropped dramatically. Three airlines are notable: Turkish, La Compagnie and Delta especially on roundtrips.
+ Google Chrome is the best browser. It remembers all my log-ons and passwords. It synchs across many laptops.
+ All your auto-pay services — like Internet, cellular, satellite, fiber — are rise in price when you’re not looking. Arguing works.
+ Amazon Kindle is wonderful for reading books. I can adjust the prize size to what my ancient eyes need. I buy a book and I can read it on my laptops or my iPhone. Best yet, all my highlighting is saved automatically in the cloud. It’s how I can quote quote from books I read. Word-for-word.
+ The charger that comes with your laptop and its USB-C connector will charge your iPhone. Saves carrying another charger.
+ Sunscreens expire. Chuck out what you have and buy ones with zinc oxide and titanium dioxide.
+ Measles is exploding. It is enormously contagious, and deadly. Your kids (and you need to be vaccinated). You need to wear a mask in crowded places like airports. You can pick measles up from surfaces, unlike Covid.
+ EyeBuyDirect is the best place to buy your next pair of glasses. I’ve used and loved them for years. My present frames — called Structure — cost the grand sum of $9 and are my favorite. Click here.
+ Need to know how to fix or use anything? Ask YouTube.
+ Scams are everywhere and getting more creative. You didn’t buy it. You don’t want it. I just got one “Awaiting Blockchain Completion.” Susan got one threatening her with obliteration because of an alleged traffic violation. Key: Check the sending address. If it looks weird, it is.
Favorite New Yorker Cartoon
The moral of this cartoon is don’t buy it. Here are some of the things we put into our country house we should not have: A swimming pool, a full-house in-ceiling sound system, a roof-top satellite TV replete endless wiring, a downstairs theater room, a remote garage not part of the house, and a tennis court installed by a crooked contractor.
What we should have included: a big laundry room, and a gas-fired fireplace (not one that burns wood).
Wimbledon Gentleman’s Final is at 11:00 EDT Sunday morning July 13
That’s tomorrow morning. Sinner versus Alcaraz. Should be good.
See you. Harry Newton
