What Is a "De-Peg" Event for a Stablecoin, and How Does It Affect the Pool? ⎊ Path

What Is a “De-Peg” Event for a Stablecoin, and How Does It Affect the Pool?

A de-peg event occurs when a stablecoin's market price deviates significantly from its intended peg, typically 1 USD. If a stablecoin in a pool de-pegs downward, arbitrageurs will quickly drain the other, still-pegged asset from the pool, exchanging it for the now-cheaper de-pegged asset.

This results in the liquidity provider being left with a disproportionately large amount of the de-pegged, lower-value asset, incurring a significant impermanent loss.

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

Explain the Risk of ‘Rug Pull’ in the Context of New, Unaudited Liquidity Pools

What Is the Role of Arbitrageurs in Maintaining the Peg of Both Fiat-Backed and Algorithmic Stablecoins?

What Is a “Rug Pull” and How Does It Cause Permanent Loss for Liquidity Providers?

What Is “De-Pegging” in the Context of Stablecoins and How Does It Affect LPs?

Why Is the Constant Sum Formula Unsuitable for Volatile, Non-Pegged Cryptocurrency Pairs?

How Does the Choice between USD-pegged and Crypto-Pegged Collateral Affect Margin Requirements?

What Constitutes a ‘Rug Pull’ in the Context of a Failed Crypto Project?

Glossar

Reserve Asset Quality

Valuation ⎊ Reserve asset quality within cryptocurrency derivatives hinges on assessing the underlying collateral’s liquidity and price stability, crucial for mitigating counterparty risk in perpetual swaps and options.