For Customers Log in
Contact Us

Stablecoin peg Meaning

The "Peg" is the 1:1 value relationship between a stablecoin and its target asset (usually the US Dollar). A stablecoin is "On Peg" when it trades at exactly $1.00.

If it trades at $1.02 or $0.98, it is "Off Peg." The strength of the "Peg" is the ultimate measure of a stablecoin's success; a stablecoin that cannot maintain its peg is essentially useless as a medium of exchange.Technically, the peg is maintained through "Arbitrage." If USDC is trading at $0.99 on an exchange, a "Market Participant" can buy it for $0.99 and "Redeem" it for exactly $1.00 from the issuer (Circle), making a 1% profit. This "Buying Pressure" pushes the price back up to $1.00.

For "Algorithmic Stablecoins," the peg is maintained by "Mint and Burn" code, which is much riskier as it relies on the "Market Value" of a secondary token to provide the backing.The "Breaking of a Peg" is the "Nightmare Scenario" in crypto. When a major stablecoin like USDT or USDC "De-pegs" even by a few cents, it triggers "Mass Panic" and cascading liquidations across the entire DeFi ecosystem.

This is why "Peg Monitoring" is a full-time job for risk managers. The "Peg" is more than just a price; it is a "Contract of Trust" between the issuer and the user, and once that trust is broken, the stablecoin often dies (as seen with UST or iron.finance).

← Back to Glossary

Explore our services
Providing liquidity in the cryptocurrency market?
Authorize on our platform and do it smarter with FM Pulse.
pic

FM Marketplace

A reliable and high-performance crypto liquidity marketplace for institutions and businesses.

Learn more
pic

FM White Label

Launch your fully branded B2B crypto trading platform in under one week.

Learn more
pic

FM Liquidity Match

Crypto OTC-as-a-Service infrastructure for enhanced monetization and trade control.

Learn more

Scale your business, leave the hard work of your trading needs to us

Reduce your integration costs and operational risk across multiple access points with our platform

Get started