A good fix requires the whole system to be re-imagined a bit. You want to start with the invariant that a stablecoin holder can liquidate to Eth at any point, and that a collateral issuer can extract their Eth at any point.
Instead of having the collateral provider be the only one who can issue the stablecoin, you could build a system where anyone could acquire the stablecoin (Dai) by putting in an appropriate amount of Eth.
Any extra Eth that gets put into the pool will issue a volatile asset, which I'll call Vai here for simplicity. Where Dai has no exposure to volatility, Vai has increased exposure to volatility. As the Eth price rises, the amount of Eth that Vai can be redeemed for increases, and as the Eth price drops, the amount of Eth that Vai can be redeemed for decreases (this is the opposite of Dai).
At any time, Eth and Vai can be redeemed for Eth from the pool. As the price of Eth moves around, the pool becomes over-collateralized and under-collateralized.
If at any point the pool becomes under-collateralized, all Vai becomes worth zero, and all Dai can redeem Eth proportional to the amount of collateral that there is. Meaning, in a "black swan" scenario, Dai holders become exposed at 1x to the price volatility of Eth. This is much better than the whole system melting down, and the Dai holders do get to dodge a significant amount of the downtrend while the Vai evaporates. (Dai holders see no exposure until all the Vai is gone).
You can keep the pool balanced using interest rates. If you have a target collateralization level (say 150%), then any time the pool is under-collateralized, you can automatically drop the interest rate that Dai holders earn (going negative if necessary). If the pool is over-collateralized, you increase the interest rate.
A lower interest rate encourages Dai holders to withdraw and Vai holders to enter. A higher interest rate encourages Dai holders to enter and Vai holders to withdraw.
-----
The most important thing about the system above is that it is highly predictable. In all scenarios where the price of Eth moves, you can model what happens, and you have guarantees on how much Eth you can draw, and you can withdraw that Eth immediately (well, you'll need to pay blockchain fees and wait for a block, but you don't need a counterparty or any sort of system liquidity). The worst case for the stablecoin holders is that they get exposure to 1x Eth, but this only happens if Eth drops faster than people deposit Vai.
There are a bunch of math tricks you can use to allow people to select different exposure levels (you could have some Dai targeting 250% over-collateralization, meaning it's very robust to huge drops in Eth price, and other Dai only target 15% over-collateralization, and these two assets could be fully fungible against eachother) for Dai holders and Vai holders, but we are getting beyond the scope of a single HN comment.