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.
De-Peg is a nasty thing and the bogeyman of all peg token investors. As the Terra Classic USD (formerly Terra USD) has shown, even a great colossus like the Terra blockchain can fall and drag down gullible investors who don’t jump out in time. So take extra care and do a proper DYOR before investing in any peg token.