Some short term price fluctuations are OK/expected. The main things are that it doesn't deviate too far off from $1, and that it goes back to 'equilibrium' relatively quickly. The proposal helps with achieving equilibrium faster. If it ends up proving itself as a relatively stable peg, then the pump-and-dumps become less extreme. As people see the price going above $1, they are likely going to sell while it is up, so they can buy back in when it goes back to $1. The same thing is true for when it dips.
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