De-Peg

De-Peg means the loss of the cryptocurrency’s peg to the underlying asset. This is a big problem for stablecoins, especially those pegged to an asset such as the US dollar (USD). If a stablecoin de-pegs, it can result in the collapse of the entire project. For example, if you’re staking a stablecoin with 10% APY, but the stablecoin de-pegs from 1.00 USD to 0.90 USD within a year, you won’t earn anything.

Example with TerraUSD

For a long time, the TerraUSD (UST) token held a peg to 1 USD. A confluence of several factors and scared investors who started selling their UST drove the price down to somewhere near 3 cents from the original 1 USD.

If you had 1,000 USD in UST, its value today would be something around 30 USD.