Depeg Events

Depeg events occur when a stablecoin or a pegged asset deviates significantly from its intended target value, usually the US dollar or another underlying asset. This loss of parity can be caused by a bank run, a collapse in the collateral backing, or an attack on the protocol's stabilization mechanism.

When a depeg happens, market confidence often evaporates, leading to panic selling and further downward pressure on the price. These events are significant because they disrupt the stability of the entire decentralized finance ecosystem, as many protocols rely on stablecoins as collateral.

Recovery from a depeg is difficult and often requires significant intervention or market stabilization measures to restore trust.