All terms
When a stablecoin loses its intended price.
A depeg is a stablecoin trading meaningfully away from its target. Small deviations happen constantly and mean little. Large ones signal doubt about the backing or a liquidity crunch.
The dangerous cases are reflexive: fear causes selling, selling widens the gap, the widening gap causes more fear.
TerraUSD depegged in May 2022 and went to near zero within days, taking roughly 40 billion dollars of value with it.
That a small depeg is noise. A stablecoin trading slightly off is the market pricing the chance that the backing is not what it claims, and the ones that failed all traded slightly off first. Small and persistent is the signal.
Common questions
What should I do if a stablecoin depegs?
Is a small depeg normal?
Where this comes up on the site
The guides that actually use this word, rather than a list of everything we have written.
Where to go next
More defi terms
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