A stablecoin has two prices, and almost every panic comes from confusing them. There is the price the issuer promises to redeem at — one dollar, for verified institutions — and there is the price the open market will actually pay you right now. When those two diverge, people scream 'depeg' as if it were one event. It is at least two, and they could not be more different.
Consider the two canonical breaks. In March 2023, USDC briefly traded at about 87 cents. The cause was specific: roughly $3.3 billion of its cash reserves were stuck at Silicon Valley Bank over a weekend, and with redemptions paused until Monday, the secondary market marked down the uncertainty. Traders who believed the Monday redemption window would honor a dollar bought the discount — and were made whole. The reserves were real; the panic was about access, not solvency. It mean-reverted, because there was something true to revert to.
Now consider Terra/UST in 2022. It was called a stablecoin and it held a number near a dollar, but it was backed not by cash or Treasuries — it was backed by confidence in its own sister token. When faith cracked, the very mechanism meant to defend the peg minted more of the collapsing token, and $40 billion evaporated in a week. That was not a liquidity event that would revert. It was a solvency discovery: the market found out there was nothing underneath.
The taxonomy is the risk
Here is the rule worth memorizing: fiat-reserve depegs are liquidity events; algorithmic depegs are solvency discoveries. The first is a question of can I get to the dollar right now. The second is a question of is there a dollar at all. They look identical on a price chart for the first few hours. They end in completely different places. Knowing which one you are holding is not pedantry; it is the entire difference between "buy the dip" and "run."
This is why the whole regulatory apparatus that arrived after these two weekends obsesses over two things: reserve quality (cash and short Treasuries, not commercial paper, not a sister token) and redemption rights (who can convert to a real dollar, how fast, guaranteed). Every rule in the GENIUS Act and MiCA is, in effect, an attempt to make sure that when the secondary price wobbles, there is a solid primary promise to arbitrage it back — and to make sure "backed" never again quietly means "backed by our own optimism."
So the next time a coin flickers below a dollar, do not ask "is it depegging." Ask which of the two prices moved, and why. If the reserves are real and the redemption door is open, you are watching a traffic jam. If the backing is reflexive, you are watching a building come down. Same number on the screen. Not remotely the same event.