What if an algorithmic stablecoin enters a death spiral?
An algo-stablecoin death spiral (peg loss + governance-token hyperinflation) is the cleanest crypto-confidence shock, with reflexive mint-and-dump cratering the token and bleeding into ETH/BTC. Rhymes precisely with the May-2022 UST/LUNA collapse that erased $40bn and triggered the 3AC/Celsius chain. Forward angle: post-Terra, algo designs are smaller and less systemically connected, so contagion should be more contained than 2022 — size the panic, not the structural risk.
Every number ships with its receipt — the odds, the range, the precedents, and a public grade at Reality Check. The statistical machinery that produces it is proprietary.
The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 0–6 months horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a mixed shock. A newly popular algorithmic stablecoin loses its peg, with its governance token entering a hyperinflationary death spiral overnight. The trigger decomposes into signed root‑shocks — Crypto confidence ▼ · Crypto liquidity ▼ — which propagate through our causal graph to the markets below.