NYDIG is calling time on what it says is one of cryptocurrency’s most persistent myths: that stablecoins are pegged to the US dollar.
In a post-mortem of last week’s $500 billion crypto market sell-off, bitcoin-focused financial services firm global head of research Greg Cipolaro pointed to the instability of supposedly stable assets like USDC, USDT, and Ethena’s USDe, which fell as low as $0.65 on Binance.
The price swings revealed that these tokens do not operate at fixed rates but rather float based on market supply and demand.
“Stablecoins are not pegged to $1. 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 such as “fixation” imply a guarantee that does not exist. What appears to be stability is actually just arbitrage: Traders buy when the currency falls below $1 and sell when it rises above, and issuers offer mechanisms to create or redeem tokens in response to those movements.
When panic hits, that system can collapse. USDT and USDC traded above $1 during the crisis, while USDe, which uses derivatives positions to remain “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 the most used assets can fail in real time and where users do not understand the real risks.
One of the best performers during the crisis was the credit markets. Leading DeFi protocol Aave liquidated just $180 million in collateral, or 25 basis points of its total locked value. NYDIG itself suffered no losses.
