A depeg is a mechanism, not a mood
A stablecoin trades at a dollar because someone will give you a dollar for it, or because arbitrageurs believe they can. When the market price drops below that, one of a few things has happened: the backing is doubted, the redemption path is blocked, the mechanism that creates the peg has reversed, or one venue has broken while the rest have not. Knowing which is the difference between selling into the bottom and sitting through a two-day dip.
Five cases, five mechanisms
| Event | Token | What actually broke | Outcome |
|---|---|---|---|
| May 2022 | TerraUSD (UST) | Algorithmic peg: UST redeemable for a dollar of newly minted LUNA. Large sales pushed UST below par, redemptions minted LUNA, LUNA fell, so the next redemption minted more. Reflexive loop | Never recovered; both tokens near zero within a week |
| May 2022 | USDT | Panic after Terra. USDT traded a few percent below par on some venues while Tether processed billions in redemptions at par | Recovered within days |
| March 2023 | USDC | Circle disclosed that part of its cash reserve sat at Silicon Valley Bank when the bank was closed. Uncertainty about that slice, plus a weekend with no redemptions, took USDC to roughly 0.88 | Recovered within about three days once deposits were guaranteed |
| March 2023 | DAI | Contagion: DAI held a large share of its collateral in USDC, so it fell with it | Recovered with USDC |
| April 2025 | FDUSD | A public accusation of insolvency against the issuer. Price dropped briefly on some venues while the issuer published reserve confirmations | Recovered the same day |
A sixth category is the synthetic dollar. USDe and its peers hold crypto hedged with short perpetual futures. They do not depeg through reserve doubt; they weaken when funding stays negative for long, when an exchange holding margin fails, or when one venue's order book breaks during a liquidation cascade and prints a price far below the on-chain one, as happened on one exchange in October 2025 while on-chain pools stayed near par. The venue and the token can fail separately.
The early signals
These show up before the headline, in roughly this order.
- Secondary-market discount. The token trades at 0.995, then 0.99, on the most liquid pairs. A discount on one small venue is noise; on every venue it is a signal.
- Redemption friction. The issuer's redemption queue lengthens, minimums rise, or redemptions pause for "maintenance". For a fiat-backed token this is the most important line, because the peg is the redemption.
- Disclosure delays. A monthly attestation arrives late, or an issuer changes the wording about where reserves are held.
- Exchange withdrawal pauses. Venues stop withdrawals of the token or its chain. Sometimes prudent, sometimes the first sign that the venue itself has a problem.
- Funding and collateral, for synthetics. Sustained negative funding, a growing gap between the collateral value and the short, a reserve fund being drawn down.
Sources you can check yourself: the price on several venues, the issuer's transparency page, the redemption terms, and a synthetic's collateral dashboard. None requires an account.
What to do during a depeg
If the backing is sound and the path is blocked. USDC in March 2023: known, bounded exposure, redemptions closed for the weekend. Selling at 0.88 turned a temporary discount into a permanent twelve percent loss. If you can verify the reserve and the discount comes from timing rather than a hole, waiting is usually right; buying is what arbitrageurs did.
If the mechanism is broken. UST: every redemption made the next one worse, and no reserve outside the loop could stop it. When the thing that creates the peg is the thing failing, the first exit is the best one, at whatever price. The same applies to a synthetic whose hedge venue has failed, or a fiat token whose issuer admits the reserve is short.
If you cannot tell. Reduce, do not liquidate. Move a part to a different issuer, a different chain or a non-stablecoin, and keep the rest until the facts arrive. The cost of being partly wrong is small in both directions.
What not to do. Do not sell everything on the venue with the worst price. Do not move funds to an exchange that has paused withdrawals. Do not swap into another stablecoin without checking whether it holds the first one as collateral.
Protecting yourself before it happens
- Diversify issuers. USDT and USDC have different reserves, different banks, different supervisors. A bank failure hits one; an accusation hits one.
- Diversify chains. A token on Tron, Ethereum and Solana is one issuer risk but three sets of venues that keep quoting it.
- Keep a reserve outside the dollar. Bitcoin has no issuer and no bank; Monero has neither and adds privacy. A share in BTC or XMR is the part no stablecoin event can touch.
- Know the exits without an account. During a depeg exchanges add verification steps, pause withdrawals, or queue. An account-free swap depends on none of that: pick the pair, enter your destination address, click Swap now, send exactly the shown amount to the deposit address, receive at your wallet. The rate locks after one Tron confirmation for USDT TRC-20 or fifteen Ethereum confirmations for USDC ERC-20.
| Exit | Pair page |
|---|---|
| USDT on Tron to Bitcoin | USDT TRC-20 to BTC |
| USDC on Ethereum to Bitcoin | USDC ERC-20 to BTC |
| USDT on Tron to Monero | USDT TRC-20 to XMR |
The rate is floating and the spread is in the quote, so in a stress event the quote will already reflect the discount; the pair page shows the all-in cost against the CoinGecko rate before you commit.
Mistakes to avoid
- Treating a yield-bearing token as cash. Yield is a risk premium, and the risk shows up in a depeg.
- Holding only the token your favourite exchange quotes. Its listing decides your exit.
- Reading one venue's price as the token's price. Check three.
- Waiting for the announcement. By then the discount is the widest it will be.
Background on how the peg is meant to work is in Stablecoins as the internet dollar.
USDT (TRC-20) → BTC
USDC (ERC-20) → BTC