Stablecoins and the crypto crash: the dollar pegs the market relies on

Which job does a stablecoin do for crypto traders before a crash?

A stablecoin is a crypto token designed to hold a fixed price, most often 1 US dollar. Traders use it as the cash of the crypto market: they park gains in it, price other coins against it, and move money between exchanges with it. That role puts the token at the centre of any crash story, because the market relies on these dollar pegs to settle trades.

The guide on what a stablecoin is explains the three main designs. Fiat-backed tokens hold reserves such as short-term government bonds and bank deposits. Crypto-backed tokens lock other coins in smart contracts. Algorithmic tokens rely on code and incentives. About 95% of stablecoins are fiat-backed, according to FATF figures reported in October 2025, so reserve quality decides most of the risk.

Why does Tether USDT matter for stablecoin risk in a crash?

Tether’s USDT is a widely used dollar token in crypto trading, so its health matters to every venue that lists it. The question for a holder is direct: could every token be redeemed for a dollar at once? The answer depends on the reserve mix, the speed at which reserves convert to cash, and the clarity of the reports that describe them.

The guide on Tether USDT risk walks through reserves, reporting, and crash scenarios. Wikipedia reports that BDO Italia has issued quarterly attestations since July 2022 and that an independent audit of the 2025 financial statements was completed in August 2026, with the report not released publicly. Reading those reports, and asking what an audit would add, gives you a concrete way to judge trust before a stress event.

What happens to the crypto market when a stablecoin depeg hits?

A depeg happens when a stablecoin trades away from its target for longer than a moment. Holders rush to redeem, sellers accept lower prices, and traders who posted the token as collateral face margin calls. The guide on stablecoin depeg covers the chain of events and the 4 stages most episodes follow: trigger, redemption rush, collateral stress, and repair.

The best documented case is USDC in March 2023. Circle disclosed $3.3 billion of reserves at Silicon Valley Bank, about 8% of the total. USDC lost its dollar peg on 11 March 2023 and regained it 4 days later. The page on the USDC depeg of March 2023 follows that episode and shows how a bank failure reached a crypto token.

Why did algorithmic stablecoins fail in the 2022 crypto crash?

Algorithmic stablecoins hold their value through code and incentives instead of full reserves. In May 2022 the UST token of Terra fell to 10 cents, and almost $45 billion of market value disappeared in about a week, according to Wikipedia. The 2022 crypto crash gained speed from that collapse, because holders of other tokens questioned every peg.

The guide on algorithmic stablecoins explains the feedback loop behind the failure: a falling price weakened the incentive to hold the token, and the weaker demand pushed the price lower. Reading the mechanism helps you recognise a similar design before a sell-off tests it.

How do stablecoin rules and the GENIUS Act change peg risk?

Rules aim to cut peg risk by requiring reserves, redemption rights, and disclosure. The European MiCA regulation applied to asset-referenced tokens and e-money tokens from 30 June 2024. The page on stablecoin regulation compares these regimes and asks what each one gives a holder during a stress event.

In the United States, the GENIUS Act was signed on 18 July 2025 and requires payment stablecoins to be backed one-for-one by US dollars or other low-risk assets. The guide on the GENIUS Act and stablecoins explains what the law covers. Brookings analyses add that such tokens lack FDIC insurance, so reserve quality stays central.

Which stablecoin risk checks apply before you hold one?

A short checklist turns this guide into action. Check what backs the token, how fast reserves convert to cash, who can redeem and at what size, how often reports appear, and which law governs the issuer. Each answer moves the risk up or down, and together they give a clearer picture than a single price quote.

The page on stablecoin risk lists what can break in each layer: reserves, banks, code, venues, and law. This page is general information, not investment advice. If you manage a treasury in Singapore, ASEAN, or Hong Kong, the EQOS Asia pricing page shows how a structured diagnostic can score your exposure.

Where does DeFi meet stablecoins in a crypto crash?

DeFi, short for decentralised finance, runs lending, trading, and yield products through smart contracts. Stablecoins are the main collateral and the main unit of account there. When a peg slips, loans backed by that token can become under-collateralised, and automatic liquidations add selling at the worst moment.

The guide on what DeFi is covers smart contract exploits, price oracle errors, and thin liquidity. Start there when your exposure includes yield products, because a stablecoin inside a protocol carries the risk of the protocol as well as the risk of the peg.

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About the author

Stéphane Jambu

President, EQOS Forecast Asia

Stéphane Jambu leads EQOS Forecast Asia and works as a consultant in e-commerce, search visibility, and AI. LinkedIn profile