Who moved the anchor of the stablecoin? Reviewing major de-pegging events over the years.

In five years, we have witnessed stablecoins decoupling in multiple scenarios.

From algorithm to high-leverage design, and then to the chain reaction of bank failures in the real world, stablecoins are undergoing a repeated process of trust rebuilding.

In this article, we attempt to connect several landmark stablecoin de-pegging events in the cryptocurrency industry between 2021 and 2025, analyze the reasons and impacts behind them, and explore the lessons learned from these crises.

The First Avalanche: The Collapse of Algorithmic Stablecoins

If there is a collapse that first shook the narrative of “algorithmic stablecoins,” it should be the IRON Finance of the summer of 2021.

At that time, the IRON/TITAN model on Polygon was all the rage. IRON is a partially collateralized stablecoin: part of it is backed by USDC, and part of it relies on the value of the governance coin TITAN through algorithms. As a result, when some large TITAN sell orders made the price unstable, big holders started to sell off, triggering a chain reaction: IRON redemption → minting and selling more TITAN → TITAN crash → IRON stablecoin further lost its peg.

This is a classic “death spiral”:

Once the price of the internally anchored asset plummets, the mechanism has little room for repair and unpegs to zero.

On the day of the TITAN crash, even the well-known American investor Mark Cuban could not escape. More importantly, it made the market realize for the first time that algorithmic stablecoins are highly dependent on market confidence and internal mechanisms. Once confidence collapses, it is difficult to prevent a “death spiral.”

Collective Disillusionment: LUNA Goes to Zero

In May 2022, the crypto market experienced the largest stablecoin crash in history, with the algorithmic stablecoin UST from the Terra ecosystem and its sister coin LUNA both collapsing. As the third largest stablecoin at that time, with a market cap of up to $18 billion, UST was once regarded as a successful example of algorithmic stablecoins.

However, in early May, UST was massively sold off on Curve/Anchor, gradually dropping below $1, triggering a continuous run on the bank. UST quickly lost its peg to the dollar at 1:1, with the price plummeting from nearly $1 to less than $0.3 in just a few days. To maintain the peg, the protocol massively issued LUNA for the redemption of UST, resulting in a subsequent avalanche of LUNA's price.

In just a few days, LUNA fell from 119 dollars to nearly zero, with a total market cap evaporating by nearly 40 billion dollars, UST dropping to a few cents, and the entire Terra ecosystem disappearing within a week. It can be said that the demise of LUNA has made the entire industry truly realize for the first time:

• The algorithm itself cannot create value, it can only allocate risk;
• The mechanism can easily enter an irreversible spiral structure in extreme market conditions;
• Investor confidence is the only trump card, and this trump card is the easiest to lose its effectiveness.

This time, global regulatory agencies have also included “stablecoin risk” in their compliance vision for the first time. The United States, South Korea, the European Union, and other countries have successively imposed strict restrictions on algorithmic stablecoins.

Not Only Algorithmic Instability: The Chain Reaction of USDC and Traditional Finance

With so many issues in the algorithmic model, is there really no risk in centralized, 100% reserved stablecoins?

In 2023, the Silicon Valley Bank (SVB) incident broke out, and Circle admitted that there were 3.3 billion USDC reserves in SVB. Amid market panic, USDC once depegged to 0.87 dollars. This incident was entirely a “price depegging”: short-term payment ability was questioned, triggering a market sell-off.

Fortunately, this decoupling was only a brief panic. The company quickly issued a transparent announcement, promising to cover potential shortfalls with its own funds. Ultimately, it was only after the Federal Reserve's decision to guarantee deposits that USDC was able to regain its peg.

It is evident that the “anchor” of stablecoins is not only the reserves but also the confidence in the liquidity of those reserves.

This turmoil also reminds us that even the most traditional stablecoins cannot completely isolate themselves from traditional financial risks. Once the anchored assets rely on the real-world banking system, their vulnerability becomes inevitable.

A False Alarm of “Depegging”: The USDE Circular Loan Turmoil

Recently, the crypto market experienced an unprecedented panic sell-off on 10·11, and the stablecoin USDe was caught in the eye of the storm. Fortunately, the eventual decoupling was only a temporary price separation and not an issue with its underlying mechanism.

USDe issued by Ethena Labs once ranked among the top three in global market capitalization. Unlike USDT and USDC, which have equivalent reserves, USDe adopts an on-chain Delta neutral strategy to maintain its peg. Theoretically, this “long spot + perpetual short” structure can withstand volatility. In practice, it has been proven that this design performs stably during market calm and supports users in obtaining a 12% base annual yield.

On top of the original well-working mechanism, some users have spontaneously superimposed a “revolving loan” strategy: pledge USDe to lend other stablecoins, and then exchange more USDe to continue staking, increasing leverage layer by layer, and superimposing lending protocol incentives to increase annualized returns.

Until October 11, the US experienced sudden macroeconomic bad news, with Trump announcing high tariffs on China, triggering panic selling in the market. During this process, the stable anchoring mechanism of USDe itself did not encounter systematic damage, but due to the overlap of various factors, a temporary price dislocation occurred:

On one hand, some users use USDe as margin for derivatives, and due to extreme market conditions triggering contract liquidations, there has been a significant amount of selling pressure in the market; at the same time, the “circular loan” structure leveraging on some lending platforms is also facing liquidations, further intensifying the selling pressure of stablecoins; on the other hand, during the withdrawal process from exchanges, gas issues on the blockchain have led to an obstruction in arbitrage channels, and the price deviation after the stablecoin lost its peg has not been corrected in time.

In the end, multiple mechanisms were simultaneously broken, leading to market panic in a short period of time, with USDe briefly dropping from $1 to around $0.6, and then recovering. Unlike some “asset failure” type decouplings, the assets in this round of events did not disappear, but were only temporarily unbalanced due to restrictions from macro bearish liquidity, clearing paths, and other reasons.

After the incident, the Ethena team released a statement clarifying that the system was functioning normally and that there was sufficient collateral. Subsequently, the team announced that they would enhance monitoring and increase the collateral ratio to strengthen the buffer capacity of the fund pool.

Aftershocks Continue: Chain Reaction of xUSD, deUSD, and USDX

The aftershocks of the USDe incident have not dissipated, and another crisis erupted in November.

USDX is a compliant stablecoin launched by Stable Labs, adhering to EU MiCA regulatory requirements and pegged 1:1 to the US dollar.

However, around November 6, the price of USDX quickly dropped below $1 on the chain, plummeting to about $0.3 at one point, losing nearly 70% of its value in an instant. The trigger for the event was the depegging of the yield-bearing stablecoin xUSD issued by Stream, caused by its external fund manager reporting an asset loss of approximately $93 million. Stream then urgently suspended deposits and withdrawals on the platform, and xUSD rapidly fell below its peg in a panic sell-off, dropping from $1 to $0.23.

After the collapse of xUSD, the chain reaction quickly spread to Elixir and its issued stablecoin deUSD. Elixir had previously borrowed 68 million USDC from Stream, which accounted for 65% of its stablecoin deUSD reserves, while Stream used xUSD as collateral. When xUSD's decline exceeded 65%, the asset support for deUSD instantly collapsed, triggering a massive run on the bank, and the price subsequently plummeted.

The run on the bank did not stop there. Subsequently, the market sell-off panic spread to other yield-bearing stablecoins such as USDX.

In just a few days, the overall market value of stablecoins has evaporated by over $2 billion. A single protocol crisis has ultimately evolved into the liquidation of the entire sector, which not only reveals issues in mechanism design but also proves the high-frequency coupling between internal structures of DeFi, indicating that risks never exist in isolation.

The Triple Test of Mechanism, Trust, and Regulation

When we look back at the decoupling cases of the past five years, we find a striking fact: the biggest risk of stablecoins is that everyone thinks they are “stable.”

From algorithmic models to centralized custody, from yield-generating innovations to composite cross-chain stablecoins, these anchoring mechanisms can experience a crash or overnight collapse, often not due to design issues but rather a collapse of trust. We must acknowledge that stablecoins are not just a product, but a mechanism of credit structure built on a series of “assumptions that will not be broken.”

1. Not all pegs are reliable.

• Algorithmic stablecoins often rely on governance token buyback and burn mechanisms. Once liquidity is insufficient, expectations collapse, and governance tokens plummet, the price can fall like a house of cards.
• Fiat-backed stablecoin (centralized): They emphasize “USD reserves,” but their stability is not completely detached from the traditional financial system. Bank risks, custodian risks, liquidity freezes, and policy fluctuations can all erode the “commitment” behind them. When reserves are sufficient but the ability to redeem is limited, the risk of depegging still exists.
• Yield Stablecoins: These products integrate yield mechanisms, leverage strategies, or a combination of multiple assets into the stablecoin structure, providing higher returns while also introducing hidden risks. Their operation relies not only on arbitrage paths but also on external custody, investment returns, and strategy execution.

2. The risk transmission of stablecoins is much faster than we imagine.

The collapse of xUSD is a typical example of the “contagion effect”: one protocol encounters issues, another uses its stablecoin as collateral, and a third designs a stablecoin with a similar mechanism, all getting dragged down.

Especially in the DeFi ecosystem, stablecoins serve as collateral assets, trading counterparts, and liquidation tools. Once the “anchor” loosens, the entire chain, the whole DEX system, and even the entire strategy ecosystem will be affected.

3. Weak Regulation: Institutional Gaps Still Being Addressed

Currently, Europe and the United States have successively introduced various regulatory draft proposals: MiCA explicitly denies the legal status of algorithmic stablecoins, while the U.S. GENIUS Act attempts to regulate reserve mechanisms and redemption requirements. This is a good trend; however, regulation still faces the following challenges:

• The characteristics of stablecoins in cross-border transactions make it difficult for a single country to fully regulate.
• The model is complex, with a high degree of interconnection between on-chain and real-world assets. Regulatory authorities have not yet reached a conclusion on its financial and settlement attributes.
• Information disclosure has not yet been fully standardized; although on-chain transparency is high, the responsibilities of issuers, custodians, and others remain relatively vague.

Conclusion: The Crisis Brings Opportunities for Industry Reconstruction

The stablecoin de-pegging crisis not only reminds us that mechanisms carry risks, but also forces the entire industry to move towards a healthier evolutionary path.

On the one hand, the technological aspect is actively addressing past vulnerabilities. For example, Ethena is also adjusting collateral rates, strengthening monitoring, and attempting to hedge volatility risks through proactive management.

On the other hand, the transparency of the industry is also continuously strengthening. On-chain audits and regulatory requirements are gradually becoming the foundation of the new generation of stablecoins, which is beneficial for enhancing trust.

More importantly, users' understanding is also upgrading. More and more users are beginning to pay attention to the underlying details behind stablecoins, such as the mechanisms, collateral structures, and risk exposures.

The focus of the stablecoin industry is shifting from “how to grow quickly” to “how to operate steadily.”

After all, only by truly achieving risk resistance can we create financial tools that can support the next cycle.