Tether starting to lose its peg too, after Terra did

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Tether starting to lose its peg too, after Terra did
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This is the unbelievable module ever!
I think this shows why having sound reserves matters. Whether it’s China’s Evergrande or Tether or Luna, people are relying on some assets to back the currency. But what happens when those assets themselves become less in demand (say, because the central bank raises interest rates?) Or if we find out (as in the case of Lehman Brothers) that the third party auditors cannot be trusted?

SeekingAlpha

Terra’s nearly 100% drop has altcoin market on edge (Cryptocurrency:LUNA-USD)

Terra (LUNA-USD) coins are dropping almost 100% in Wednesday morning trading as its sister token TerraUSD (UST-USD), an algorithmic stablecoin, falls substantially further from its $1 peg…

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Intercoin should be different as it can be “backed by” the community currencies themselves, ie the goods and services that you can get in a growing number of communities is what gives value to the Intercoin money system. That’s why the dollar and other national currencies are more stable (assuming they aren’t hyperinflated by their issuers).

But in the beginning, people who get paid in local currencies will want to know what “backs” them. And Intercoin “backs” them, in that they are exchangeable for it. But what backs Intercoin? Well, what backs gold? The fact is that there has always been some demand for gold from “whales” (royalty, etc.) and that made people comfortable to use it as a store of value. Same with Bitcoin and so on — the “whales” make the market. Eventually the pension funds may choose to use it as reserves etc. But that is a self-fulfilling prophecy … it is a reserve until it isn’t.

What actually matters is how many goods and services it can be exchanged for. And Intercoin is almost unique in being designed as a scarce currency that is explicitly designed with maximum utility in mind. So that eventually, anywhere you go, eventually, you can exchange it for goods and services. Because of the network effect and the social software. And that’s what really matters, rather than collective mythos behind a coin, because the latter can just as easily give way to something else.

At the end of the day, what gives value to the bank’s money, and the dollar, isn’t so much the gold or “the full faith and credit of the United States” but the fact that people will sell you things for that money, and will work hard to repay loans to the bank given in that money. At the end of the day, that is what gives any currency value.

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