If you recall what happened to USTC, I mean the Tera classic stable coin? It wasn't backed by anything other some portion of some BTC and their tokens. It was an experiment meant to succeed beyond the space of USDT but failed when Bitcoin price start dumping and when some people saw some flaws in the Defi, they made use of it to manipulate the price and short the he'll living out of the stable coin and today, it's worth nothing, all investment down the drainage.
UST had an impressive LFG fund which was the collateral for LUNA, this fund had tens of billions of dollars in bitcoin. The main problem was that UST was giving an unrealistic interest rate, almost 20%. At that rate, you need a constant inflow of new money. It was more like some kind of pyramid scheme, where the pyramid lives if there is a constant inflow of new money. Because of the problems in tokenomics, LUNA faced hyperinflation and even a huge fund could not save the situation. Apparently they realized that the situation cannot be saved and it is easier to sell off all bitcoins than to try to keep UST from de-peg.
Yet the unrealistic interest rate was used to attract people to locked their token on the protocol without reviewing the implication of what they did, more like a genocide and greed and they all fell for it. Selling the Bitcoin was the greatest mistake because they know very well that BTC is backbone of everything, they held billions worth of it which people has many believe in, it was a red flag to do that even for the purpose of the general market. I just think that UST was a test protocol that was poorly designed during the bullrun, it would have been better during a time like this when there there is no too much greed and excitement.
It's kind of even funny that CZ and many OGs Venture capitalist regret ever coming to the market. If Luna and FTX were to be still alive today, maybe the market will be stable and have much trust than the way it is now, it will take a lot of effort for us to go back there again, even Elon is gradually exiting the space.