What Happens to Impermanent Loss in a StableSwap Pool If One Stablecoin De-Pegs Severely?

StableSwap pools are highly optimized for a 1:1 ratio. If one stablecoin de-pegs severely, the pool behaves like a constant sum pool near the peg, but the curve bends sharply away from the peg.

This mechanism means that arbitrageurs will quickly drain the pool of the more valuable, still-pegged stablecoin. LPs will be left holding almost 100% of the de-pegged, less valuable stablecoin, resulting in a severe, realized impermanent loss that can be much greater than in a standard x times y equals k pool.