Current FEI price shows that people are losing confidence in this project. They are willing to sell FEI back to the protocol for ETH at a 20% discount compared to what they paid for it in the Genesis, while the collateral ratio is as high as 120% - more than enough to back all the FEI in circulation. So I would put the current situation this way: the project is still financially healthy, but the holders are losing patience. What is needed to be done is to restore people’s confidence.
However, the project may not be financially healthy forever. If ETH drops more than 20%, the PCV will be insufficient to back the peg. This could happen in no time in such a high volatile market, especially when the market has more than quadrupled in a few months. So immediate actions must be taken.
I believe restoring the reweight mechanism (without turning on reward or burning) is a effective way to restore the peg, or at least move the prive much closer toward the peg. Here is what will happen.
FEI price: arbitrageurs will buy FEI at discount in hope to sell it back when reweight occurs. It’s important to note that when reward is off, reweight doesn’t not hurt the protocol because people are practically selling FEI at a discount to initial price ($1.01). Other holders will stop selling FEI at current discount because they can expect a better price when reweight occurs. (even when bots always outrun normal holders, the fact that the bots are not selling at current level indicates that when reweight occurs, the normal holders will not get a worse price than current level). These amplify buying power and dampen selling pressure, which will push the price toward the peg.
PCV: when reweight occurs, PCV will fall for sure. However, the FEI in circulation will fall even faster, resulting in an increase of collateralization ratio. This is because any selling of FEI at a discount will benefit the protocol (and the remaining hodlers of FEI), which issued the FEI at $1.01. This is no bad thing, because those who will sell FEI will sell FEI every moment they get a good price - we cannot stop them from selling. The only thing we can do to is to let them sell at a discount which ramps up the collateral.
TRIBE: hard to predict. TRIBE price reflects market participants’ perception of the project in the long run. The only thing we know is that if people keep losing confidence in the project, TRIBE will eventually become worthless. Restoring the peg will help restore confidence.
For implementation of the reweight without burning and reward, I would propose reweight at least once a day, set by the guardian or governance. Other options welcome.