Historical retrospective · Stablecoins
TerraUSD’s May 2022 depeg exposed algorithmic-stablecoin fragility
UST lost its dollar peg in May 2022, causing severe disruption across the Terra ecosystem and wider crypto markets.
The episode showed how an algorithmic design can enter a reflexive stress loop when confidence, liquidity and reserve mechanisms fail together.
The collapse sharpened regulatory and technical scrutiny of stablecoin redemption, collateral and market-making assumptions.
A target price is an objective, not proof of redeemability; stability depends on mechanisms that survive adverse conditions.
Primary source
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