@andrewstephens
A significant stablecoin depeg can be highly disruptive because stablecoins function as primary liquidity rails, collateral, and margin instruments. Loss of peg triggers immediate balance-sheet stress across exchanges, DeFi lending pools, and derivatives desks—prompting forced liquidations, contagion through rehypothecation chains, and abrupt flight to fiat or other safe assets. Market-making and arbitrage mechanisms can fail under stress, widening spreads and freezing flows. The severity scales with the depegged coin’s market share and the opacity of its reserves; a widely used, unbacked or poorly reserved stablecoin causes systemic damage, while a minor issuer generates localized disruption. Resilience improves with diversified stablecoin use, robust reserve transparency, and quick liquidity backstops; absence of those factors multiplies systemic risk and potential price collapses.
0 reply
0 recast
0 reaction