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I am trying to understand the pricing of crypto currencies.

Assuming there is a fictional cryptocurrency that is pegged (say) the Chinese Renminbi and the price of Wheat (the relation being the Renminbi amount needed to buy 1000 bushels of wheat), how will the price of the cryptocurrency be determined?

Will it be determined solely by market forces (i.e. supply and demand)?

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If there is fungibility, i.e. the owner of the cryptocurrency has legal title over the referenced commodities, that is can demand an exchange where he surrenders the crypto units and receives the commodity, one unit should have the exact same value as the referenced commodities.

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  • $\begingroup$ Not exactly, but very close. The reason why not is the redemption has a both a cost associated with it, (fee) and a risk premium since the redemption relies on trust in the redeemer fulfilling the order. $\endgroup$ – wildbunny Mar 29 at 11:04
  • $\begingroup$ fair enuf, was not considering that, but of course true $\endgroup$ – ZRH Mar 29 at 11:07

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