A stablecoin depeg happens when a token designed to track a reference price, usually one US dollar, trades materially above or below that price.
Why Depegs Happen
Depegs can come from reserve concerns, liquidity shortages, protocol design flaws, exchange freezes, banking stress, or panic redemptions.
Why It Matters
Stablecoins are often treated like cash in crypto portfolios. During stress, a weak peg can turn a defensive position into a concentrated risk.
Types Of Stablecoins
Stablecoin design affects depeg risk. Fiat-backed, crypto-backed, algorithmic, and yield-bearing stablecoins have different failure modes.
| Type | Main thing to verify |
|---|---|
| Fiat-backed | Reserve quality, audits, redemption access, and banking partners. |
| Crypto-backed | Collateral ratio, liquidation design, and oracle quality. |
| Algorithmic | Whether demand can survive without reflexive incentives. |
| Yield-bearing | Source of yield and liquidity during withdrawals. |
Depeg Warning Signs
Watch for widening spreads, redemption delays, declining liquidity, reserve uncertainty, large outflows, and unusual borrowing rates. A small depeg can be temporary, but the context matters.
How TokenRadar Applies This
TokenRadar treats stablecoins as risk assets, not cash equivalents by default. Peg stability, backing transparency, liquidity, chain exposure, and counterparty risk all affect how defensive a stablecoin position really is.
Practical Rules
Diversify stablecoin exposure, understand where redemption happens, and avoid assuming that on-chain liquidity equals full backing. During stress, the best stablecoin is not always the one with the highest yield; it is the one with the clearest path back to par.