Stablecoins are the backbone of crypto liquidity, offering traders and investors a reliable medium to preserve value amid market volatility. Yet, despite their critical role, one fundamental concept has remained frustratingly ambiguous: what exactly constitutes a depeg?
In theory, a depeg occurs when a stablecoin trades below its intended 1:1 fiat value—typically against the U.S. dollar. But in practice, minor fluctuations of 0.01% or less happen constantly due to market mechanics, raising a key question: when does a small deviation become a meaningful depeg?
This article introduces a new, data-driven metric to define and measure depegs with greater precision. By combining stablecoin trading volume, instrument-specific weighting, and time-based severity scoring, we establish a dynamic threshold system that reflects real-world market impact—not just price noise.
Why Existing Definitions Fall Short
Most discussions treat any deviation from $1.00 as a depeg. But under that logic, nearly every stablecoin “depegs” daily. For instance, if TUSD trades at $0.99998 for an hour, is that a systemic failure? Likely not.
The problem lies in context. A $0.995 price on a low-volume stablecoin matters far less than the same price on a high-volume giant like USDT. The economic impact scales with volume: a small discount across billions in trading volume represents significant value leakage.
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Thus, we need a volume-adjusted depeg threshold—a benchmark that tightens as a stablecoin’s market presence grows.
Introducing the Volume-Adjusted Depeg Threshold
Our model calculates a unique depeg threshold for each stablecoin based on its global monthly trading volume. The formula ensures that more liquid stablecoins have stricter thresholds—because even tiny deviations carry larger systemic risks.
For example:
- USDT, with $320 billion in year-to-date stablecoin-stablecoin volume, has a threshold of **$0.998**.
- TUSD, with significantly lower volume, has a wider buffer at $0.995.
This approach acknowledges that market depth affects resilience. High-volume pairs absorb shocks better—but when they do break their threshold, the implications are more severe.
Weighting by Instrument Importance
Not all trading pairs are equal. A price drop on a low-liquidity decentralized exchange (DEX) shouldn’t carry the same weight as one on Binance’s USDC-USDT pair, which dominates global volume.
To address this, we apply volume-based weighting:
- Each trading instrument (e.g., USDC-USDT on Uniswap V3) is assigned points proportional to its share of total stablecoin-stablecoin volume.
- Instruments contributing less than 0.01% of volume are excluded to reduce noise.
- Cross-pricing synthesizes USD values across stablecoin pairs (e.g., deriving USDT-USD from USDT-USDC).
This method reveals hidden dynamics. For instance:
- Uniswap V2 showed frequent unweighted depegs for USDC, but contributed minimally to overall volume.
- Binance, despite fewer depeg hours, ranked high in weighted depeg severity due to massive trade flows.
Measuring Depeg Severity: From Hours to Magnitude
We analyze depegs using two granularities:
Hourly Analysis: Capturing Sharp Shocks
On August 7, 2025, USDT hit a 98% depeg severity at 8 AM UTC—trading below threshold across nearly all major instruments. This followed $500 million in net selling across Binance, Huobi, and Uniswap over just days.
Despite the relatively modest price dip (around $0.997), the breadth and volume made it one of the year’s most severe events.
Daily Analysis: Identifying Sustained Pressure
Using daily data, we introduce depeg magnitude—defined as depeg severity divided by 10:
- TUSD on June 7: Magnitude 6 (nearly 60% severity)
- USDT on August 7: Magnitude 5
- USDC, BUSD, DAI: No magnitude 1+ events since April
Think of it like earthquakes: magnitudes below 2.5 are rarely "felt" by the broader market.
Exchange-Level Insights: Where Depegs Happen
Different exchanges play distinct roles:
- March 2025 Crisis: USDT depegged primarily on Uniswap V3 and Curve, not Binance—highlighting DEX fragility during stress.
- July–August 2025: Bitforex accounted for nearly all weighted USDC depeg hours, suggesting localized liquidity issues.
- BUSD: Remarkably stable despite regulatory uncertainty around its NYDFS authorization expiry—thanks to strong liquidity management.
TUSD’s stability stemmed from concentrated liquidity: 95% of its volume came from TUSD-USDT on Binance, reducing fragmentation risk.
Key Stablecoin Performance Highlights
| Stablecoin | Last Major Depeg | Current Stability Trend |
|---|---|---|
| USDT | August 7 (Magnitude 5) | Increasingly fragile; consistent discounts |
| USDC | March 12 (Magnitude 10) | Strong recovery; minor tremors on DEXs |
| DAI | March 12 (Magnitude 8) | Highly stable post-crisis |
| BUSD | None since April | Model of consistency |
| TUSD | June 12 (Magnitude 6) | Benefiting from centralized liquidity |
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Limitations and Future Improvements
While robust, the model can be refined:
- Suspicious volumes: Some exchanges exhibit inflated or artificial activity. Future iterations will filter these out more aggressively.
- Dynamic weighting: Fixed annual weights could be replaced with rolling windows to reflect shifting market conditions.
- Broader data integration: Including off-chain redemption activity could enhance predictive power.
Frequently Asked Questions
Q: What is a “depeg” in crypto?
A: A depeg occurs when a stablecoin’s market price deviates significantly from its intended fiat value—usually $1.00 USD. Minor fluctuations are normal; sustained drops below volume-adjusted thresholds indicate real instability.
Q: Why is USDT depegging more often?
A: Two main reasons: declining liquidity and Tether’s redemption fee/minimum. These make it cheaper to sell USDT than redeem it, increasing downward pressure during sell-offs.
Q: How does trading volume affect depeg severity?
A: Higher volume means greater market impact. A 0.5% discount on $10B in volume loses more value than the same discount on $10M—so high-volume coins have stricter thresholds.
Q: Is DAI truly stable despite being overcollateralized?
A: Yes—since April 2025, DAI has maintained strong peg integrity despite its complex backing structure, thanks to active arbitrage and protocol incentives.
Q: Can centralized exchanges prevent depegs?
A: They help. Concentrated liquidity on platforms like Binance reduces fragmentation, making it easier to maintain the peg—but creates centralization risks.
Q: What’s the solution to recurring USDT depegs?
A: Remove or lower the redemption fee and minimum. This would improve supply elasticity, allowing holders to redeem instead of dumping on open markets.
Final Thoughts
Stablecoin stability isn’t just about price—it’s about context, volume, and market structure. Our new metric moves beyond simplistic price checks to deliver a nuanced, scalable definition of depegs that reflects real financial risk.
As stablecoins grow in importance—from payments to DeFi to institutional finance—having precise tools to assess their health becomes essential.
The data shows clear leaders: BUSD, DAI, and USDC have demonstrated resilience since April. Meanwhile, USDT’s repeated August depegs signal growing structural concerns—not yet critical, but worth monitoring closely.
👉 Stay informed with real-time analytics on stablecoin health and market trends.