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.
In crypto, a peg is the intended fixed or near-fixed price relationship between one asset and another. It is most often used to describe stablecoins that aim to stay equal to a reference asset, such as 1 token equaling 1 US dollar. The peg is the target; the methods used to maintain it can vary. Some stablecoins hold cash, Treasury bills, or other reserves, while others use crypto collateral or algorithmic incentives to help keep the market price close to the target.
A peg matters because users rely on stablecoins for payments, trading, savings, and moving value between crypto platforms without taking on as much price volatility as assets like bitcoin or ether. If a stablecoin trades above or below its peg for long, confidence can weaken and the token may become less useful. For example, if a dollar-pegged stablecoin falls to $0.97, traders may question whether it can be redeemed or whether its reserves are sufficient. This movement away from the target is often called losing or breaking the peg.
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.
Depeg
A depeg happens when a stablecoin or pegged crypto asset trades noticeably away from the value it is meant to track.