A stable currency is a data encryption currency that has a relatively stable value compared to a special property or a basket of property, usually a legally prescribed currency such as the US dollar, Europe or Japanese yen.

Compared with traditional data cryptocurrencies such as BTC (BTC) and ETH, stable currencies are committed to providing a "relatively stable" medium of exchange for value storage, and the uncertainty of this currency is likely to be very high.

Spot commodities such as Fiat car currency, data cryptocurrency and their gold and silver are used as collateral for property "applicable" to a stable currency. USDT, USDC and DAI are many stable currencies that keep an eye on the dollar.

Stable money can also be stabilized in optimization algorithms through blockchain intelligent contracts and other systems, which automatically adjust the supply of coins in the market to keep it linked to call options.

Despite the hidden benefits, smooth feeding is not without risks. The main risk of all stable investments is that the probability of pegging to the dollar is broken, resulting in a decline in the value of call options.

Decoupling means that the value of a stable asset is significantly different from that of the linked value. This should be caused by a variety of reasons, including the current market situation, liquidity problems and regulatory changes.

The USDC is a stable currency backed by thorough reserves, which means that every dollar coin has specific cash applicable to US debt in the short term. Even so, Circle, a foreign investor in USDC, announced on March 10th that USDC had been decoupled from the dollar, with about $3.3 billion in reserves of $40 billion in USDC that had failed Silicon Valley banks. The bank's 16th largest foreign bank, which went bankrupt on March 10, is one of the largest bank failures in British history. Taking full account of the further impact of USDC, other stable China has used for reference one after another and decoupled from the US dollar.

MakerDAO- is an agreement based on ethernet blockchain technology-Publishing DAI, an algorithmically stable currency dedicated to maintaining a precise 1:1 ratio to the US dollar. However, during the bankruptcy period of Silicon Valley Bank, Dai Xianglong also moved away from the current policy of pegging to the US dollar, mainly because of the contagion effect of the US Trade Development Commission's decoupling from the US dollar. The reserve for DAI contains more than 50% of the stored USDC.

Tether sells USDT, with each USDT OTP equivalent to the corresponding legally prescribed currency at 1:1 and all applicable to the reserve of Tether. However, the USDT also decoupled in 2018, causing anxiety about the overall stable system of the stable currency.

The necessity of stabilizing currency pegging

The need for a smooth currency peg depends on the stability and predictable value given to a call option or a basket of property, usually a legally prescribed currency such as the dollar. Because of its reliability and predictability, stable currency is an ideal alternative to a variety of use cases, including data cryptocurrency trading, payment and remittance.

With a relatively stable currency peg, traders can move into and out of trading positions without being affected by price adjustments in data cryptocurrencies such as BTC or ETH. This will be critical for investors and companies that rely on reliable value storage and trading media to run their business.

The application of fixed exchange rate system can also make cross-border transactions easier to carry out, especially in large countries where exchange rate changes or access conditions for traditional financial information services are limited. Compared with more traditional forms such as bank wire transfers or money transfer services, stable coins can provide a more efficient and affordable form of payment and cross-border e-commerce transfer value.

Pegging to a stable currency can also increase the diversity of the financial sector, especially for individuals or companies with difficult access to traditional financial services. Sablecoins can be used to buy and trade digital currencies without the need for bank accounts or bank credit cards, which is likely to be important in developed and emerging economies.

Why do horseshoe lactone decouple?

Because of the integration of micro and macro factors, a stable currency may be decoupled. External economic factors include changes in the current market situation, such as the sudden increase or decrease of stable profitable market demand, liquidity problems and the modification of basic collateral. Macroeconomic independent variables involve changes in the overall economic pattern, such as inflation or interest rate hikes.

For example, if the increase in data cryptocurrency transactions results in a surge in demand, the price of a stable currency may temporarily exceed its pegged value. But if liquidity dries up and demand is strong, the price of a stable currency could fall below its value.

At the macroeconomic policy level, if there is high inflation, the spending power of underlying assets that support a stable exchange rate is likely to decline, which could lead to decoupling. Similarly, changes in annual interest rates or other macroeconomic policy responses can seriously affect relatively stable monetary requirements.

Regulatory shifts or legal risks can also lead to smooth currency decoupling. For example, if government departments ban ringgit, the need for ringgit will be reduced, resulting in a reduction in value. New technical problems such as loopholes in blockchain intelligent contract systems, hacking and network congestion will also lead to decoupling. For example, a shrewd contractual flaw may cause the value of stable earnings to be improperly measured, resulting in a significant deviation from its current policy of pegging the exchange rate.

How does Stablecoins decouple?

Smooth currency decoupling often requires a number of processes, which are likely to vary depending on the actual situation of stabilizing the currency and causing the decoupling event. The following are some general characteristics of decoupling events:

The value of a stable currency is not so much pegged to put the cart before the horse

As mentioned earlier, many factors, such as volatile sales markets, technical difficulties, illiquidity and regulatory difficulties, may lead to relatively stable currency decoupling. The value of a stable currency can change dramatically compared to linked property or a basket of assets.

Traders and investors responded to the decoupling incident

Whether it seems to them that the value of a stable currency will eventually return to the peg or continue to shift the peg, traders and investors are likely to buy or sell a stable currency when it is pegged with a large offset.

Arbitrage opportunities arise

If the value of a stable currency shifts to the exchange rate rules and regulations of the dollar, the opportunity for arbitrage is likely to become a reality. For example, if the value of the stable currency is higher than the pegged currency, the trader may sell the stable currency and buy call options to make a profit.

Stablecoin publishers take action

If the value of a stable currency deviates again from its pegged rules and regulations, stable money publishers may take action to correct the situation. This may require adjustments to stable money market supply, pledge ratios and other behaviour to increase recognition of stable currencies.

The value of a relatively stable currency is stable.

If traders and investors adjust their trading positions and foreign investors take action on decoupling, the value of stable currencies may improve steadily. If stablecoin publishers succeed and win the trust of the public, the value of stablecoin may be linked again.

Risks and challenges related to smooth protein decoupling

Decoupling from a stable currency could create many risks and difficulties for investors, traders and more data encrypted currency ecosystems:

• Market changes: when the currency is decoupled smoothly, the sales market may experience severe unrest, as traders and investors affect ownership in response to decoupling. This could create market uncertainty and increase the probability of losing money.
• Reputation risk: decoupling from a stable currency could seriously endanger the credibility of foreign investors and more data in the encrypted currency ecosystem. This may make it difficult for stable issuers to attract new customers and investors and reduce the overall value of the sales market.
• Interest rate risk: if the currency is decoupled smoothly, liquidity problems may arise as traders and investors sell stable currencies in large quantities. As a result, the value of a stable currency is likely to fall, exposing traders and investors to the test of cash holdings.
• Counterparty risk: because of decoupling, traders and investors will face the risk of default in many aspects of stable currency issuers or participating in the actual operation of stable currencies.
• Regulatory risk: decoupling of a stable currency can also pose regulatory problems. He may impose restrictions on such property if the government and the government believe that the property threatens the stability of the broader financial system.

Taking full account of the above risks, investors and traders should pay close attention to the performance of stable investments in their capital structure. Scientific research on stablecoin foreign investors as well as pledges, and pay attention to any signs of decoupling or other issues that may affect the value of stablecoin. They can also consider diversifying their holdings based on the use of stable investments or other assets. This can reduce the probability of losses in relatively stable currency decoupling accidents.