Reflexive Stablecoin

Reflexive stablecoins are only partially backed or not backed at all by external collateral. This means that there is no asset outside of the system that helps to maintain the value of the stablecoin (i.e., Terra's UST stablecoin). They are highly sensitive to economic cycles, making them susceptible to decline during periods of contraction, potentially leading to a downward spiral, as seen with UST. Other stablecoins have a mixed internal/external profile, meaning they are partially backed by collateral, such as Frax.