What is a stablecoin depeg? When a $1 coin stops being worth $1
By SendPay Business · · 2 min read
A stablecoin aims to hold a steady value, usually $1. A depeg is when its market price moves away from that target. Small wobbles happen often, but a large depeg can wipe out much of what holders thought was safe.
How the peg is meant to hold
Most large stablecoins are backed by reserves such as cash and short-term government bonds, and the issuer lets approved customers swap coins for dollars. If the price dips below $1, traders buy cheap coins and redeem them for $1, which pushes the price back up.
Why a depeg happens
- Doubts about the reserves, such as money stuck at a failed bank.
- A rush of holders selling at once, faster than redemptions can keep up.
- A flawed design, such as a coin backed only by another volatile token.
- Thin trading on some exchanges, which can cause brief price gaps.
Two real examples
In May 2022 TerraUSD (UST), an algorithmic stablecoin, lost its peg and collapsed towards zero. In March 2023 USDC fell to about 87 cents after its issuer, Circle, said $3.3 billion of its reserves were held at Silicon Valley Bank; it returned to $1 once US authorities said SVB depositors would be protected.
What to check before holding one
Look at what backs the coin, how often the reserves are reported and checked, who can redeem and how quickly. A stablecoin is not a bank deposit, so it isn't covered by deposit protection schemes.
Where SendPay fits
SendPay platforms let customers buy, sell and hold crypto, held with regulated partners, alongside GBP, EUR and USD accounts, powered by licensed partners. SendPay doesn't offer trading tools, DeFi or lending.
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Stablecoin depeg calculator →What is the difference between USDT and USDC?
They are the two largest dollar stablecoins, run by different issuers.
USDT vs USDC →What is proof of reserves?
A way for crypto firms to show they hold the assets they owe customers.
Proof of reserves →Read next
This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.