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The Devastation Of The Crypto Crash… What About Bitcoin?

That highlights the risk with algorithmic stablecoins. When the supply spiked and TerraUSD lost its peg earlier this week, the arbitrage mechanism failed to resolve the problem. At that point, Terraform Labs’ Bitcoin reserve was supposed to correct the problem, but that has yet to happen. Instead, the price of the stablecoin has continued to plunge, and panicked investors have been selling, adding to the downward pressure.