How to achieve stablecoin peg

Very early draft paper (not sure it will be finished)

Crypto-banking 101

In my last paper, I’ve described the similarities between crypto-banking and regular banking. Stablecoin like USDC, DAI are just deposit. In turn, when you deposit DAI on Nexo, you no longer hold DAI but an on-demand IOU on DAI. Nexo will most likely not keep this DAI idle. The same is true when you deposit a one-dollar bill into your bank account.

For banking to work you need to satisfy the rules of liquidity, the ability to exercise your IOU and solvency, the ability to stay creditworthy.

In this paper…

This paper describes the business of banking and how it applies in the crypto-world. While Decentralized Finance is all about reinventing the wheel and experimenting (e.g. algorithmic stablecoins), banking is an old industry and rules still apply.

The first classification was done by Haseeb Qureshi in his article Stablecoins: designing a price-stable cryptocurrency (2018). The term stablecoin means being stable regarding another asset, usually the US Dollar (USD). Stablecoins are defined by being either fiat-backed (with USD in a bank account), crypto-collateralized (using USD denominated loans backed by a greater value of crypto-assets), and non-collateralized or algorithmics (backed by nothing).

Haseeb Qureshi -Stablecoins: designing a price-stable cryptocurrency

Capture from that provide the real time yield curve

The borrower, the lender, and the liquidity provider

The Yield Protocol launched a beta version this week. The whole concept is to allow borrowing and lending at fixed rate up with a maturity currently up to 15 months.

I advocated 2 years ago that stablecoins will see massive adoption. That true by market capitalization and by transactions volume. Interestingly, the big winner is still the unreliable Tether/USDT.

The complete guide for a performing portfolio

With bitcoin delivering an insane performance (+3400% over the last 5 years) and DeFi getting traction, maybe you want a guide to invest in this world? This is it.

Before going in detail, let me state that nothing here is investment advice, it is merely an explanation of the blockchain world. Invest at your own perils.

Of coins, liquidity and protocols

When you think about investing in the blockchain economy, you think buying some bitcoins. Maybe some ethers if you are a bit more nerdy. Those are the two main coins (units of value) on the blockchains currently.

For year, the narrative was an outperformance of US over … well the rest of the world. Is that the real story?

The narrative since the Covid-19 recovery is the leadership of the FAANGM stocks. Indeed, they now represent more than 20% of the SP500. Five stocks (excluding Netflix) that represent 20% of a 500 stock index!

Let’s dig a bit using the Russell 2000 index that represent the biggest 2000 stocks of the US market but with an equal weight (instead of a market size weight). That reduce the impact of some stocks and better represent the whole market…

On this, still Covid-19, recovery, the main narrative is the push from retail towards the stock market. I already found that saving rates are going insane, in correlation with interest in stock and robinhood on Google Search and posted their impact on oil, bitcoin and Tesla. In this post, I dig a bit inside this community that redefine how markets are supposed to work.

For instance, below is the price chart of Hertz (pink) and the number of stock holder of Hertz in RobinHood. …

In previous posts (regarding equities, oil and bitcoin), I proposed that the retail investor is marginal buyer that push price higher. In this post, I suggest evidence that it is the case.

First, from the FRED database, we can see that the saving rate is at a whooping 33%. How can you save a third of your income when unemployment is at a all time high (since 1950) of 14.7%? Well it seems that income was higher as well thanks to unemployment benefit and the help of helicopter money.

FAANGM (Facebook, Amazon, Apple, Netflix, Google and Microsoft) are the new darling of the market and explain why there is such a discrepancy between the market and the general economy.

Luckily for us Yardeni has compiled a great book of data on the subject. FAANGM stocks are now 24% of the S&P 500 market cap something that increased during the Covid-19 crisis.

During the Covid-19, bonds ETF were under a stress and the ETF price started to diverge from the underlying NAV (Net Asset Value). Was the ETF price or the underlying NAV faulty?

On the chart below, we can see that volume on TLT trading began to spike on March 6 and a discount began to appear. The number of shares (orange) didn’t react until March 11 where the discount was 5% ! Then, as the number of outstanding shares started to decline, the price got back in line. …

Sébastien Derivaux


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