A depeg (from de-peg) is when a stablecoin that is supposed to trade near a target — usually one US dollar — trades meaningfully away from that price for more than a fleeting blink. Brief discounts happen in stressed markets; a depeg is the episode you still remember the next morning.
Two classroom examples sit at opposite ends. In March 2023, USD Coin (USDC) briefly traded well below a dollar after news about reserves tied up in a failing bank, then recovered as confidence and liquidity returned. In 2022, the algorithmic TerraUSD (UST) lost its peg and did not come back — a design failure, not a weekend scare. Same word, different endings.
Why it happens: doubts about reserves or custodial banks; fragile algorithmic designs; thin liquidity and panic selling; broken bridges or oracle prints that freeze a wrong price on-chain; sanctions or regulatory shocks that freeze redemption paths. In DeFi lending, a depegged “stable” collateral can cascade into liquidations and bad debt even if you never touched the failing token directly.
How to check before you park size in a stablecoin: read who issues it and how reserves are attested; prefer transparent, frequently updated attestations over vibes; know where you can redeem and how long that takes under stress; and treat any chat promising “stable 2% a day on our dollar token” as a different product entirely — usually a yield scheme wearing a stablecoin costume.
“Dollar” on a ticker is a claim. Price charts and redemption terms are the test.
If a depeg or fake-stable pitch cost you funds, start at Get help. Anyone selling guaranteed restoration for an upfront crypto fee: Fake recovery.
This article is for general information only. It is not legal or financial advice. Details change. If you have lost money, contact your bank or card issuer and use the routes on the help pages.