“the worst case scenario, the pegged currency drops to zero, which requires the central bank or stablecoin to buy back its entire reserves, which requires that the central bank or stable coin have a reserve equal to its entire market cap in the underlying.” — here’s a great misunderstanding of the nature of the crypto collateral.

The whole article can be basically compressed into one sentence: if stablecoin backed by collateral, then if 100% of users sell it there should be enough collateral/reserve overwise price will drop to zero.

The fully decentralized crypto reserve itself won’t able to guarantee minimal market value — it depends on market demand. This demand depends on real-use cases and a number of users. So there’s always a risk.

However, when the system growths — stable units itself will have large user-base and use-cases so it will have native value for the same reasons as the crypto reserve. Therefore, the statement “stablecoin will work with an amount of collateral in the underlying less than the full market cap of the pegged currency is categorically false.” is categorically false.