Depeg
A depeg happens when a stablecoin or pegged crypto asset trades noticeably away from the value it is meant to track.
A depeg is when a crypto asset designed to maintain a fixed price, usually a stablecoin, moves away from its target value. For example, a dollar-pegged stablecoin is intended to trade close to $1; if it falls to $0.92 or rises to $1.05, it has depegged. Depegs can be temporary or severe, and they may happen because of low liquidity, market panic, flawed design, reserve concerns, smart contract issues, or heavy redemptions.
Depegs matter because stablecoins are widely used for trading, lending, payments, and moving value between crypto platforms. If a stablecoin loses its peg, users may face unexpected losses, liquidations, or difficulty exiting positions. A simple comparison is a gift card meant to be worth $100: if people begin doubting whether it can be redeemed, it may trade for less than $100. In crypto, the strength of the peg depends on the asset’s design, reserves, redemption process, and market confidence.
Other terms in Stablecoins
Algorithmic Stablecoin
A stablecoin that uses software rules and market incentives to try to keep its price near a target, usually without full collateral backing.
Collateralized Stablecoin
A stablecoin backed by assets held as collateral to help keep its price close to a target value, usually a fiat currency like the US dollar.
DAI
A crypto-backed stablecoin designed to track the value of the U.S. dollar without relying solely on bank deposits.
Peg
A peg is a target value that a stablecoin or crypto asset is designed to maintain relative to another asset, such as the US dollar.