Price of algorithmic stablecoin UST drops 2% below dollar peg (opens in new tab)

I don't understand how you can use cryptocurrency as backing for a stable coin. Just as a matter of definition, if your stable coin is meant to be worth $1USD then your backing fluctuates with the price of the crypto that backs your stable coin. And to make matters worse, when BTC drops in value that's likely because there's a net outflow from BTC back into fiat, which is going to occur at the exact time that people want to redeem their USDT for their actual USD. So at the time that you're most in need of liquid collateral, you're least well collateralized. The only way I see this working is if you're not net long crypto, which I guess is possible but gives you heaps of market risk.

DAI has worked pretty well though