A depeg means a stablecoin no longer trades at the price it is pegged to — usually one US dollar. If the coin trades at 0.97 dollars it is 3% below the peg; at 1.02 it is above. For a casino player the fall is what matters: the number in the balance stays the same, but its value decreases.
Why a depeg happens
- Swings in confidence. If the market doubts whether the issuer's reserves cover all coins, the coin is sold below face value.
- A reserve problem. If part of the reserve is stuck in a bank or in assets that cannot be turned into cash immediately, the redemption promise weakens.
- A mechanism failure. Algorithmic stablecoins that do not rest on sufficient collateral can lose the peg permanently.
Real examples
In May 2022 the algorithmic TerraUSD (UST) lost its peg and its value fell close to zero. In March 2023 USDC briefly fell clearly below a dollar when it emerged that part of its reserve was caught in the collapse of Silicon Valley Bank; the peg recovered within a few days. Both cases are described in the Wikipedia article on stablecoins. They show two different risks: a permanent loss and a temporary swing.
What a depeg means at a casino
If you hold a balance in a coin whose price falls, the balance's value falls in the same proportion. If the casino shows the balance in dollars and converts the coin itself, the result depends on the rate at which it converts — worth looking for in the terms of use. During a depeg casinos may also temporarily suspend deposits or withdrawals in that coin.
How to keep the risk small
- Keep only the amount needed for play at the casino; withdraw winnings to your own wallet.
- Prefer a coin whose issuer publishes information about its reserves regularly, and follow the news.
- Do not swap in a panic during a depeg — the loss is then certainly realised. At the same time there is no guarantee that the peg recovers.
A depeg is a special kind of exchange-rate risk: smaller than with bitcoin, but not zero. More detail: stablecoins at casinos: USDT, USDC and depeg risk.