Depeg

A depeg happens when a stablecoin trades meaningfully away from the value it is designed to track, such as a dollar-referenced token changing hands below or above one dollar. Causes include doubts about reserves, a bank or custodian failure, frozen redemptions, thin liquidity on a particular venue, or forced selling during market stress; collateral-based designs can also lose the peg when their backing falls in value faster than liquidations can respond. Some depegs last minutes and reverse once arbitrage works, while others persist and end in permanent loss for holders. Price alone does not reveal the cause, so a brief discount on one exchange and a structural failure of backing can look similar at first glance.