Term

Depeg

When a pegged asset (like a stablecoin) deviates significantly from its target price (e.g., $1).

Type:

market

risk

Also known as:

Lose the peg

concept

A depeg occurs when a pegged asset trades above or below its intended reference price for a sustained period. Causes include liquidity shortfalls, collateral stress, oracle failures, or market panic.

Example 1.1

A dollar-pegged stablecoin trading at $0.92 indicates a depeg below target; redemptions and market-making may restore the peg if underlying collateral is sound.

risk

Depegs can cascade across DeFi where the asset is used as collateral. Risk controls include circuit breakers, redemption queues, and diversified collateral.

Example 2.1

If a stablecoin used widely in lending pools depegs, collateral liquidations may intensify selling pressure, prolonging the depeg until liquidity returns.

Related Terms

Algorithmic Stablecoin

→

A stablecoin that targets a peg using algorithmic supply rules rather than full collateralization.

stablecoin

tokenomics

Bridge

→

Infrastructure that enables moving assets or messages across blockchains.

technology

defi

All terms and definitions may update as the Cryptionary improves.