The stablecoin problam

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Paperliss proposed adjusting the DAO's Rate Slope 1 for stablecoin markets to 6-6.5% due to rising Federal interest rates, but MarcZeller and EzR3aL disagreed, citing low appetite for crypto as collateral and better yields in traditional finance. The discussion, highlighting differing views on the impact of Federal interest rates on stablecoin markets, was closed by MarcZeller, redirecting it to discord for further community engagement.

The discussion was initiated by Paperliss, who expressed concern over the recent increase in Federal interest rates to 5.5% and its potential impact on stablecoin markets, specifically the Rate Slope 1. They proposed that the DAO should adjust to this higher interest rate environment by raising the Rate Slope 1 for all stablecoin markets to 6-6.5% in the short term, and in the long term, make upgrades to the protocol to allow users to access external yield1.

However, MarcZeller pointed out that this was not a governance proposal and suggested moving the post to another section. They also noted that the market doesn't work as Paperliss suggested and that there's currently a low appetite to use crypto as collateral2. EzR3aL concurred with MarcZeller, stating that there's no need for stablecoins at the moment as they can't be farmed like in 20204. They also explained that as long as traditional finance offers better yield, people will stay there. They predicted that demand for DeFi will only increase when the Federal Reserve lowers interest rates, which they don't foresee happening until at least 20246.

Despite the disagreement, Paperliss maintained that the volatility of interest rates is bad for user experience9. The discussion was eventually closed by MarcZeller, who reiterated that the forum is not the right medium for such discussions and invited Paperliss to join the discord for further discussions with the community11. This discussion highlights the differing views within the community on the impact of Federal interest rates on stablecoin markets and the appropriate response by the DAO.

Posted 4 months ago

Last reply 4 months ago

Summary updated 2 months ago

Last updated 04/12 00:18