Stablecoin Depegs: Measuring Stress in Real Time
A stablecoin is only as stable as confidence in its backing. The indicators that reveal peg stress early, and how depegs spread through markets.
Fiat-backed stablecoins aim to trade at one unit of their reference currency by allowing eligible holders to create and redeem tokens against reserves. When the market doubts that redemptions will be honoured at par, the secondary-market price can fall below the peg. In March 2023, for example, a major dollar stablecoin briefly traded well below one dollar after news that part of its reserves was held at a failed US bank.
Early indicators
- Secondary-market price against the peg across multiple venues and quote currencies.
- Order-book imbalance in stablecoin/fiat and stablecoin/stablecoin pairs.
- Widening spreads and thinning depth on the redemption side.
- Shifts in on-chain supply as holders redeem or move between stablecoins.
Transmission
Because so much crypto trading is quoted in stablecoins, a depeg distorts prices across the market. An asset quoted in a stablecoin that trades at a discount will appear to rise in that stablecoin even if its dollar value is unchanged. Collateral valued in the affected stablecoin can trigger margin effects on derivatives venues.
This publication is provided for informational purposes only and does not constitute investment, legal, or tax advice, or an offer or solicitation to buy or sell any asset. Live figures are computed from third-party public market data and may be delayed, incomplete, or inaccurate.
