Stablecoin Depeg

The “stable” in “stablecoin” is not always guaranteed. Depeg risk is the chance that a token built to hold a fixed value loses it and doesn’t recover.

Not all stablecoins break the same way. Fiat-backed coins depend on real-world reserves, so when the backing is impaired or frozen, the market prices in the doubt. Crypto-collateralized coins can slip when their backing falls faster than the system can liquidate it. Algorithmic coins are the most fragile, relying on market incentives that can flip into a death spiral, where a falling price triggers more selling that drives the price down further.