What Is Depeg?

A depeg occurs when a stablecoin loses its intended peg to an underlying asset, typically the US dollar, causing it to trade meaningfully away from its target price. Depegs can result from liquidity shocks, reserve backing issues, smart contract failures or loss of market confidence. Notable examples include the TerraUSD (UST) collapse in 2022, where the algorithmic stablecoin fell from $1 to near zero, and temporary USDC depegs during banking crises. Depeg risk is a critical consideration for trading strategies that hold or rely on stablecoin positions.

See also

• Stablecoin

• USDC

• Risk-adjusted return

• Decentralised finance

• Trading strategy