Depegged

Depegged refers to the state of an asset that was previously maintained at a fixed exchange rate or price relative to another asset (the peg) but is no longer held at that level. The term is commonly used in finance to describe currencies, but it also applies to stablecoins and other instruments that aim to maintain a fixed value.

In currencies, a peg is a policy choice by a government or central bank to keep its currency’s value fixed to another currency or basket of currencies. When the peg is abandoned or collapses, the currency is said to be depegged and may float or move toward a market-determined rate. In the crypto and stablecoin space, a depeg occurs when a token expected to maintain a stable value deviates from its target price, typically the value of 1 unit of the anchor asset such as 1 USD.

Mechanisms of depegging include official abandonment of the fixed rate, market pressure overcoming the central bank’s or issuer’s reserves, or design flaws in the peg mechanism. Consequences can range from heightened volatility and rapid exchange-rate moves to broader financial stress, impacts on import/export prices, and changes in monetary or fiscal policy. For stablecoins, a depeg can erode trust, trigger redemptions, and affect liquidity across markets.

Notable examples include the 2015 Swiss franc unpegging from the euro, which led to large currency movements, and the 2022 depeg of the algorithmic stablecoin TerraUSD (UST) during its collapse. The concept also traces to historical shifts such as the end of the gold standard in 1971, which removed fixed gold-backed exchange rates.

See also: currency peg, fixed exchange rate, stablecoin, currency crisis.