04-27-2020, 12:33 PM
Using a high frequency market maker to maintain a stable coin
<!-- SC_OFF --><div class="md"><p>I'm really interested in the rollout of cryptocurrencies as a fiat currency. But I would assume that comes with a myriad of other problems such as liquidity management, implementations of monetary policy, and inflation management. All of that seems sort of "out of the hands" of cryptocurrencies mostly because there it is hard to control from a decentralized point of view, and hard to manage inflation because of the finite amount of coins. But I was wondering if a government was to create a high frequency market maker they could in theory work some of these problems out. They could always maintain liquidity because they can make a market. They can also implement monetary policy actions by using facility. It would similar to quantitative easing. Where the government would supply liquidity in the market, but that liquidity would come from "thin air" (i.e. the creation of new coins). This all seems like it could work, but I have found one possible problem. Why would anyone need to make a market? Then there shouldn't be a reason to have a market for trading it. I was wondering what your guys' takes on this is, or if there is any other research on this.</p> </div><!-- SC_ON --> Kind Regards R
<!-- SC_OFF --><div class="md"><p>I'm really interested in the rollout of cryptocurrencies as a fiat currency. But I would assume that comes with a myriad of other problems such as liquidity management, implementations of monetary policy, and inflation management. All of that seems sort of "out of the hands" of cryptocurrencies mostly because there it is hard to control from a decentralized point of view, and hard to manage inflation because of the finite amount of coins. But I was wondering if a government was to create a high frequency market maker they could in theory work some of these problems out. They could always maintain liquidity because they can make a market. They can also implement monetary policy actions by using facility. It would similar to quantitative easing. Where the government would supply liquidity in the market, but that liquidity would come from "thin air" (i.e. the creation of new coins). This all seems like it could work, but I have found one possible problem. Why would anyone need to make a market? Then there shouldn't be a reason to have a market for trading it. I was wondering what your guys' takes on this is, or if there is any other research on this.</p> </div><!-- SC_ON --> Kind Regards R