We've already seen this with DAI and the issue with an overcollaterlised stablecoin is that you now require more staked to acquire it so what's the point? Why would I want to stake an asset to get a stablecoin that is being devalued by the inflation rate of the underlaying currency it represents?

If it's to trade and a yield so it's self-defeating, because you need to beat the sunk cost hurdle rate before you even start making profit. So why not just get an issued stablecoin or just use fiat? Algo stablecoins are a solution looking for a problem