Stablecoin Depeg: Why Does Depegging Happen With Stablecoins?

Stablecoins bridge the gap between volatile cryptocurrencies and traditional finance by pegging their value to stable assets such as the U.S. dollar. However, there have been instances where the value of a stablecoin has deviated from its peg, resulting in depegging.

This article examines stablecoin depegging, its causes and impacts, and the complex mechanisms designed to maintain stablecoins’ stability. We'll also discuss historical depegging events and provide insights on how traders can protect themselves if depegging occurs.

Key Takeaways:

• Stablecoin depegging is the deviation of a stablecoin's value from its pegged asset, typically a fiat currency.

• Some of the most common reasons for stablecoin depegging include market dynamics, governance and management challenges, macroeconomic events, smart contract vulnerabilities and blockchain network issues.