Bravo, Haseeb. A lucid and concise account of this historic stablecoin crash.

All that pile of dead bodies we see lying on the ground are attempts at perpetual motion called "seigniorage algorithmic" stablecoins. It should remind us of all those disastrous attempts to fly heavier-than-air machines not too long ago. Good for all of us, the Wilbur brothers did finally fly such a machine. Maybe the right way to do algorithmic stablecoins is just around the corner.

The network effect of trust in a currency does not have to increase the per-unit value of that currency (by managing quantity well enough), but does engender more trust in such currency. In other words, we trust the value of USD because so many other people trust it too. However, such trust can erode by excessive and persistent increase in quantity. Inflation expectation is highly infectious and once it gains traction, it is very difficult to counteract it. The Fed is doing a heroic job of nipping runaway inflation in the bud, even at the risk of a recession, but who knows? Maybe it's too late. Even the mighty USD can hyperinflate under bad management.