What Is the Impact of a Stablecoin De-Pegging on the Broader DeFi Ecosystem?
A major stablecoin de-pegging introduces systemic risk to the entire Decentralized Finance (DeFi) ecosystem. Stablecoins are the primary unit of account and collateral in DeFi lending, borrowing, and trading protocols.
A de-peg causes massive liquidations across protocols that accepted it as collateral. It also breaks liquidity pools, leading to impermanent loss and loss of confidence in all related DeFi instruments, freezing capital flows.
