A stable coin is any cryptocurrency pegged to a stable asset, such as gold or fiat currencies. In theory, a stablecoin will remain constant in price, as it is a representation of a known amount of an asset.
My question is: Does a stable coin have a set total coin supply? Or does it have to be able to create and destroy based on the demand?
The image in my head goes like this:
A stable coin pegged to a currency started off its business saying it would have a coin supply of $5 billion. Everything works well until one day, the crypto market goes south and everyone rush to buy the stable coin. The coin is unable to sell to everyone because the demand for the coin is too high, so some people are left out.
Please correct me my misconception
My question is: Does a stable coin have a set total coin supply? Or does it have to be able to create and destroy based on the demand?
The image in my head goes like this:
A stable coin pegged to a currency started off its business saying it would have a coin supply of $5 billion. Everything works well until one day, the crypto market goes south and everyone rush to buy the stable coin. The coin is unable to sell to everyone because the demand for the coin is too high, so some people are left out.
Please correct me my misconception
It really depends on what mechanism they are using to moderating the stability of their coin.
Different systems can have completely different and contrasting mechanisms of doing so. For example, stable tokens on the BTS network work completely differently to Tether. So there is really no one single answer to your question.
And generally, if the stable coin is decentralised in moderating its volatility, the process takes some time to reflect. So when demand is high, prices will still go up on the market. If you want to see an example of this, go look at the SBD charts.