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Stablecoin Depegs Explained: What Really Happens When a Digital Dollar Breaks the Buck
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Stablecoins promise a constant $1, yet USDC has traded at $0.87, Tether’s USDT at $0.88, and Terra’s UST collapsed to virtually zero in a crash that erased roughly $40 billion.
Key facts
- The March 2023 USDC depeg was more of a banking problem, as Circle disclosed that $3.3 billion of its reserves sat at the failed Silicon Valley Bank, resulting in the token falling to $0.87
- Stablecoins promise a constant $1, yet USDC has traded at $0.87, Tether’s USDT at $0.88, and Terra’s UST collapsed to virtually zero in a crash that erased roughly $40 billion
- That buffer is also unevenly distributed since USDT and USDC alone still account for roughly 83% of the entire $307.6 billion stablecoin market, meaning the redemption machinery that keeps the whole
- The category opened 2026 at $310 billion, climbed to roughly $320 billion by mid-April, and topped out near $322.1 billion in mid-May
Summary
USDC fell to $0.87 in March 2023 after $3.3B of Circle’s reserves froze at Silicon Valley Bank. Stream Finance’s xUSD crashed to $0.43 in November 2025 after a $93M fund manager loss. Total stablecoin supply fell $14.6B from its May 2026 peak of $322B (as of early August). Nothing in a stablecoin’s code holds its price at $1, meaning that the peg is simply an economic promise where the issuer says every token can be redeemed for one real dollar, and arbitrage does the rest.