Evaluating only Fei Protocol’s profile at its peak — without knowing the outcome — the model ranked Market collapse as the #1 likely cause. Documented cause: Founder chaos.
Key Events Timeline
FUNDING
Raised $19M from a16z and others; launched FEI stablecoin
FUNDING
April launch: $1.3B ETH deposited; immediately de-pegs below $1
August: announced shutdown; protocol value returned to users
Full Analysis
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Documented cause
Fei Protocol was an algorithmic stablecoin backed by Protocol Controlled Value (PCV) — instead of relying on over-collateralization, it used a treasury of ETH and other assets to algorithmically maintain the $1 peg. It raised $19 million from a16z and Andreessen's Marc Andreessen personally. On launch day in April 2021, it attracted $1.3 billion in ETH — only to immediately de-peg below $1, trapping users who couldn't exit. The burn mechanism that was supposed to protect the peg instead created massive selling pressure. The FEI team fixed the peg mechanism but trust was shattered. After a merger with Rari Capital (which had itself suffered an $80 million hack), Fei Protocol announced it was shutting down in August 2022 and returning remaining protocol value to users.
Lesson
“Algorithmic stablecoin mechanisms that work in test environments fail catastrophically at scale because the mechanism assumes rational actors — and $1.3B of launch day buyers are not rational actors, they're momentum traders.”