Depeg

A depeg occurs when a stablecoin or pegged asset loses its intended fixed value ratio (typically 1:1 with a fiat currency like the US dollar). Depegging can be caused by loss of confidence, insufficient reserves, market panic, or flaws in the stabilization mechanism. The most dramatic depeg in crypto history was the collapse of UST (TerraUSD) in May 2022, which lost its dollar peg entirely and caused billions in losses across the market.