Depeg

When a stablecoin trades meaningfully away from its target value.

A depeg is when a stablecoin's market price diverges from its peg (usually $1). Minor depegs of a few basis points happen routinely in volatile markets and are arbitrage opportunities. Sustained depegs of more than 1-2% suggest underlying problems: collateral concerns, redemption gates, bank failures, or in the worst case, a death spiral.

The USDC depeg of March 2023 (to $0.87) was triggered by Silicon Valley Bank's failure exposing USDC reserves. The UST depeg of May 2022 (to near zero) ended Terra entirely. Reading whether a depeg is recoverable requires understanding the specific collateral and redemption mechanisms.