We spent the last year figuring out what algorithmic stablecoins are and came up with a dynamic model that might help us understand what’s going on with #Terra_Luna . Here are our main takeaways. THREAD. So what’s an algorithmic stablecoin? Fundamentally the idea is simple: you maintain a peg by dynamically adjusting stablecoin supply to match the demand so that the price doesn’t change.

There is something odd in today’s money markets. T-bill and repo rates are negatives and the Fed’s ON repo facility is close to half a trillion in uptake. Why is that? Because there are not enough T-bills available, as in 2016-2017. I wrote my job market on this topic.THREAD 1/12 Why has bill supply started to matter so much for money markets? Post-crisis regulation created a segmentation of money markets and T-bills are cash for the shadow banking sector without an account at the Fed. LessT-bills -> less liquidity for shadow banks -> higher repo spread.2