A depeg occurs when a stablecoin’s market price moves noticeably away from its intended reference value. The size and duration of that move can vary.
Why the price can move
Selling pressure, thin liquidity, doubts about reserves, collateral losses, redemption delays, or smart-contract problems can all weaken a peg.
The recovery mechanism depends on the design: issuer redemption, collateral incentives, or market arbitrage. A name containing “USD” does not guarantee one-dollar value.
A depeg reflects an imbalance or loss of confidence
Heavy selling, thin liquidity, redemption problems, collateral concerns, or technical failures can push market price away from the target.
Returning to the target is not guaranteed
Arbitrage can help restore a peg only when traders trust the redemption or collateral mechanism and can use it effectively.
Sources
Educational information, not investment advice.