Analysis of the Causes of Stablecoin Depegging

Stablecoin depegging refers to the phenomenon where the promise of maintaining a value of one dollar is broken, with the causes varying for each token. For USD Coin (USDC), issues with bank deposits are cited; for Tether (USDT), trust and redemption accessibility are the main concerns; for TerraUSD (UST), the algorithmic design is at fault; and for xUSD, the income-generating DeFi structure is highlighted as a key reason. The Federal Reserve explained that the price stability of stablecoins relies on the redemption by issuers and arbitrage. USDC fell to $0.87 after $3.3 billion was locked up due to the closure of Silicon Valley Bank (SVB) in March 2023. Tether dropped to between $0.85 and $0.88 due to insolvency rumors in October 2018. TerraUSD lost its dollar peg and effectively approached zero after being sold as an algorithmic stablecoin by the SEC in May 2022. xUSD fell to $0.51 after an external fund manager announced a loss of $93 million in 2025. The total market capitalization of stablecoins is $300.79 billion, with Tether and USDC accounting for $182.98 billion and $72.15 billion, respectively. The issue of depegging should first verify the trust in redemptions and collateral structures rather than just a decrease in supply.

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