⚠️ RISKS & SECURITY
Depeg
Definition
A depeg occurs when a stablecoin or pegged asset loses its intended price peg (typically $1 for USD stablecoins). Depegs can be temporary (market-driven) or permanent (fundamental failure). Causes include bank runs, collateral crises, oracle failures, or loss of confidence. The severity ranges from minor fluctuations to total collapse (e.g., UST/LUNA).
Example
Example
USDC briefly depegged to $0.87 in March 2023 when Silicon Valley Bank (holding $3.3B of Circle's reserves) collapsed, before recovering after government intervention.
Risks to Consider
Risks
- Cascading depegs across DeFi
- Liquidity pool imbalance
- Collateral value collapse
Common Questions
Are all depegs dangerous?
No. Minor temporary depegs (e.g., 0.5% deviation) are normal and usually corrected by arbitrageurs. Sustained depegs exceeding 2-5% signal deeper problems and warrant caution.
