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Q » Why do algorithmic stablecoins risk death spirals?
02 Nov, 2025
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A » Algorithmic stablecoins risk death spirals because they rely on algorithms and market incentives to maintain their peg. If confidence is lost or the market becomes volatile, the mechanisms designed to stabilize the coin can fail, leading to rapid devaluation. This can trigger sell-offs, further destabilizing the coin and causing a self-reinforcing downward spiral, as seen in cases where the market's belief in the peg's stability is compromised.
03 Nov, 2025
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