NYDIG is calling time on what it says is one of crypto’s most persistent myths: that stablecoins are pegged to the U.S. dollar.
In a post-mortem on last week’s $500 billion crypto market sell-off, the bitcoin-focused financial services firm’s Global Head of Research Greg Cipolaro pointed to the instability of supposedly stable assets like USDC, USDT and Ethena’s USDe, which dropped as low as $0.65 on Binance.
The price swings revealed that these tokens don’t operate on fixed pegs, but rather that they float based on market supply and demand.
“Stablecoins are not pegged to $1.00. Period,” NYDIG’s Cipolaro wrote in a research note. “In reality, stablecoins are market-traded instruments whose prices fluctuate around $1.00 due to trading dynamics.”
He argued that terms like “peg” imply a guarantee that doesn’t exist. What appears to be stability is actually just arbitrage: traders buy when the coin drops below $1 and sell when it rises above, with issuers offering mechanisms to create or redeem tokens in response to those moves.
When panic hits, that system can break down. USDT and USDC traded above $1 during the crash, while USDe, which uses derivative positions to stay “delta-neutral” and generate yield, collapsed. While it fared worse on Binance — which later compensated users as a result — it also saw significant drops on other major exchanges.
The result, he added, is a fragmented ecosystem where even widely used assets can fail in real-time, and where users misunderstand the actual risks.
One outperformer during the crash was the lending markets. Leading DeFi protocol Aave liquidated just $180 million worth of collateral, or 25 bps of its total value locked. NYDIG itself suffered no losses.