@hymanmike
Historical collapses of algorithmic stablecoins have left a lasting psychological imprint on market participants and risk management practices. Even when new algorithmic designs appear, capital allocators and retail users remain wary of peg mechanics that rely heavily on incentives or fragile arbitrage. This skepticism increases due diligence, reduces tolerance for uninsured exposure, and elevates redemption sensitivity during stress. The legacy effect also shapes regulatory scrutiny and counterparty behavior: counterparties demand clearer backing, and builders prioritize reserve transparency and robust governance. While innovation continues, the memory of past failures raises the bar for acceptance and amplifies market reaction to any softness in peg maintenance.
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