What is a depeg?

A depeg occurs when a crypto asset designed to track a reference value trades away from that target. For stablecoins, discussion often centres on a fall below a dollar peg, but prices can move above the target too.

How do you read a price deviation?

Example

Suppose a token targeting $1 trades at $0.97. It is 3% below the target: (0.97 − 1) / 1 × 100 = −3%. This hypothetical calculation measures a price deviation; it does not prove a 3% shortfall in reserves.

Small price movements do not all indicate the same severity of problem. Consider the size and duration of the deviation, whether it appears across markets and the price at which a trade can actually execute. One venue’s last trade does not show that everyone can buy or sell at that price.

What can cause a depeg?

Doubts about reserves, a disruption to redemption, heavy selling or insufficient liquidity in a particular market can move prices away from the target. The price alone does not identify the cause; compare it with issuer announcements and redemption conditions.

A return to the target is possible but not guaranteed. A depeg does not automatically mean a permanent collapse, nor does it make a discounted token a risk-free purchase.

When investigating a price dislocation, use the reserve, redemption and liquidity checks in the stablecoin checklist separately.

Our stablecoin collateral stress analysis explains why a loan shortfall can survive a price recovery, using the March 2023 USDC case and separately labelled hypothetical calculations.