Depeg

A depeg happens when a stablecoin's trading price drifts away from the value it's supposed to track — typically one US dollar — instead of holding steady at or extremely close to it.

Small, brief deviations of a fraction of a cent are normal and happen constantly as supply and demand shift on different trading venues; they usually correct quickly as arbitrage traders buy the cheaper side and sell the more expensive one, pulling the price back toward the peg. A depeg in the meaningful sense is larger and more sustained — the market losing confidence that the token can be redeemed for its stated value, whether because of doubts about the issuer's reserves, a technical failure in an algorithmic design, or a broader liquidity crunch. Historical depeg events have ranged from brief, minor wobbles to severe and permanent collapses, so the term covers a wide range of severity.

This matters for anyone holding or swapping stablecoins because a depeg changes what you're actually holding, sometimes suddenly. A stablecoin trading at $0.97 instead of $1.00 has lost real value even if the ticker and mental model say "one dollar." If you're using a stablecoin as a temporary parking spot between trades or as a funding source for other swaps, a depeg during that window means you get less real value out than you put in — which is part of why not all stablecoins carry the same risk profile, and why the strength of an issuer's backing matters.

Zest's stablecoin depeg tool, at /tools/stablecoin-depeg, tracks how major stablecoins are currently trading relative to their peg, which is a useful check before routing a swap through one, especially during periods of broader market stress when depeg risk tends to rise across the board.

Depeg events are also connected to liquidation risk in leveraged positions: if a stablecoin used as collateral depegs downward, positions collateralized in that asset can suddenly look undercollateralized even though nothing about the borrower's behavior changed, triggering liquidations that wouldn't otherwise have happened. Understanding depeg risk is less about predicting when it will happen — that's not something anyone can reliably do — and more about recognizing that "stable" is a design goal and a track record, not an absolute guarantee, and adjusting how much you concentrate in any single stablecoin accordingly.