When do stablecoins "break" away from the dollar?

2025-11-06 17:05:38

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Depeg is when a stablecoin suddenly loses its peg to its nominal value. It sounds boring, but the consequences can be serious.

How does it work?

Tether (USDT) promises that its token is always worth $1. In reality, it’s just a promise — the token is backed by trust that Tether Limited has the dollars in its accounts. If the company suddenly can’t handle a (collapse, scam, or reserve issues), then USDT will drop below $1 and start its independent journey.

Real-world examples:

UST $1 Terra( — completely collapsed in 2022. The algorithmic stablecoin turned out to be a typical pyramid scheme and crashed to zero. People lost billions.
BUSD and USDC in March 2023 — banking panic triggered FUD, and stablecoins fell below parity. USDC especially took a hit after Silicon Valley Bank went bankrupt. Everyone was worried they wouldn’t be able to withdraw their funds.
Trend in 2023 — the quality of reserves for top stablecoins has declined. This is no joke — if USDC or USDT depegs, the entire crypto market will go down.

The main point: a depeg is a warning sign of reliability issues with a stablecoin. If you see it dropping below its nominal value, it’s a red flag.

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