Who tampered with the stablecoin's anchor? A review of major de-anchoring events over the years.

Over the past five years, we have witnessed stablecoins de-pegging in multiple scenarios.

From algorithms and high-leverage designs to the chain reaction of real-world bank failures, stablecoins are undergoing repeated trust rebuilding.

This article attempts to connect several landmark stablecoin de-pegging events in the crypto industry between 2021 and 2025, analyze the underlying causes and impacts, and explore the lessons learned from these crises.

In this article, we attempt to connect several landmark stablecoin de-pegging events in the crypto industry between 2021 and 2025, analyze the underlying causes and impacts, and explore the lessons learned from these crises.

The First Avalanche: The Collapse of Algorithmic Stablecoins If there was one crash that first shook the narrative of "algorithmic stablecoins," it was IRON Finance in the summer of 2021. At that time, the IRON/TITAN model on Polygon became a viral sensation. IRON is a partially collateralized stablecoin: partly backed by USDC and partly backed by the value of the governance coin TITAN through an algorithm. As a result, when large TITAN sell orders made the price unstable, large holders began to sell, triggering a chain reaction of bank runs: IRON redemption → minting and selling more TITAN → TITAN collapse → IRON stablecoin further lost its anchoring ability. This was a classic "death spiral": Once the price of the underlying asset it's pegged to plummets, the mechanism has little room for repair and will eventually decouple and go to zero. On the day TITAN crashed, even prominent American investor Mark Cuban wasn't spared. More importantly, it made the market realize for the first time that algorithmic stablecoins are highly dependent on market confidence and internal mechanisms; once confidence collapses, it's difficult to prevent a "death spiral." In May 2022, the cryptocurrency world witnessed the largest stablecoin crash in history, with the Terra ecosystem's algorithmic stablecoin UST and its sister coin LUNA both collapsing. At the time, UST was the third-largest stablecoin with a market capitalization of $18 billion, and was once considered a successful example of algorithmic stablecoins. However, in early May, UST experienced a massive sell-off on Curve/Anchor, gradually falling below $1 and triggering a continuous run on the exchange. UST quickly lost its 1:1 peg to the US dollar, and its price plummeted from nearly $1 to less than $0.3 within days. To maintain the peg, the protocol issued a large amount of LUNA to redeem UST, resulting in a subsequent collapse in LUNA's price. In just a few days, LUNA fell from $119 to almost zero, wiping out nearly $40 billion in market capitalization. UST dropped to a few cents, and the entire Terra ecosystem vanished within a week. It can be said that LUNA's demise made the entire industry realize for the first time that: Algorithms themselves cannot create value, they can only allocate risk; Mechanisms are extremely prone to entering an irreversible spiral structure under extreme market conditions; Investor confidence is the only trump card, and this trump card is most easily rendered ineffective. This time, global regulators have for the first time included "stablecoin risks" in their compliance considerations. The United States, South Korea, the European Union, and other countries have successively imposed strict restrictions on algorithmic stablecoins.

It's not just the algorithm that's unstable: The chain reaction between USDC and traditional finance

With numerous problems in the algorithm model, are centralized, 100% reserve stablecoins truly risk-free?

In 2023, the Silicon Valley Bank (SVB) scandal erupted when Circle admitted to holding $3.3 billion in USDC reserves with SVB. Amid market panic, USDC briefly de-pegged to $0.87. This event was a classic example of "price de-pegging": doubts about short-term payment capabilities triggered a market sell-off. Fortunately, this de-pegging was only temporary, and the company quickly issued a transparent announcement, promising to cover the potential shortfall with its own funds. Ultimately, USDC was able to re-peg after the Federal Reserve announced its decision to protect deposits. It is evident that the "anchor" of stablecoins is not only reserves, but also confidence in the liquidity of those reserves. This turmoil also reminds us that even the most traditional stablecoins cannot be completely isolated from traditional financial risks. Once the pegged asset relies on the real-world banking system, its vulnerability is unavoidable. A False Alarm: The USDE Revolving Loan Crisis

A False Alarm: The USDE Revolving Loan Crisis

Recently, the crypto market experienced an unprecedented 10/11 crash panic, and the stablecoin USDE was caught in the eye of the storm. Fortunately, the eventual de-pegging was only a temporary price deviation, not a problem with its internal mechanism.

A while ago, the crypto market experienced an unprecedented 10/11 crash panic, and the stablecoin USDE was caught in the eye of the storm. Fortunately, the de-pegging was only a temporary price deviation, and it was not a problem with its internal mechanism.

USDe, issued by Ethena Labs, once ranked among the top three in global market capitalization. Unlike USDT and USDC, which have equal reserves, USDe uses an on-chain Delta-neutral strategy to maintain its peg. Theoretically, this "long spot + short perpetual" structure can withstand volatility. In fact, this design has proven stable in stable markets and allows users to obtain a basic annualized return of 12%. Building upon this well-functioning mechanism, users have spontaneously developed a "revolving loan" strategy: pledging USDe to borrow other stablecoins, then exchanging them back for more USDe to continue pledging, layering leverage and leveraging lending protocol incentives to increase annualized returns. Until October 11th, a sudden negative macroeconomic event occurred in the United States: Trump announced high tariffs on China, triggering panic selling in the market. During this process, the USDe's stable pegging mechanism itself did not suffer systemic damage, but a temporary price deviance occurred due to a combination of factors: Firstly, some users used USDe as margin for derivatives, and extreme market conditions triggered contract liquidation, leading to significant selling pressure. Simultaneously, "revolving loan" structures with leveraged leverage on some lending platforms also faced liquidation, further exacerbating the selling pressure on stablecoins. Secondly, on-chain gas issues during exchange withdrawals disrupted arbitrage channels, preventing timely correction of the price deviation after the stablecoin's depegging. Ultimately, multiple mechanisms collapsed simultaneously, causing a brief market panic. USDe briefly fell from $1 to around $0.6 before recovering. Unlike some "asset failure" type de-pegging events, the assets in this incident did not disappear; the temporary imbalance in the peg was caused by factors such as macroeconomic headwinds, liquidity constraints, and liquidation paths. Following the incident, the Ethena team issued a statement clarifying that the system was functioning normally and that collateral was sufficient. Subsequently, the team announced that it would strengthen monitoring and increase the collateral ratio to enhance the buffer capacity of the liquidity pool. The aftershocks continue: a chain reaction of stampedes involving xUSD, deUSD, and USDX. The aftershocks of the USDe incident have not yet subsided, and another crisis erupted in November. USDX is a compliant stablecoin launched by Stable Labs, meeting EU MiCA regulatory requirements and pegged 1:1 to the US dollar. However, around November 6th, the price of USDX rapidly fell below $1 on-chain, plummeting to as low as approximately $0.3, instantly losing nearly 70% of its value. The trigger was the depegging of xUSD, a yield-generating stablecoin issued by Stream, due to its external fund manager reporting approximately $93 million in asset losses. Stream immediately suspended deposits and withdrawals on its platform, and xUSD quickly fell below its peg during the panic selling, dropping from $1 to $0.23. Following the collapse of xUSD, the chain reaction quickly spread to Elixir and its stablecoin deUSD. Elixir had previously lent 68 million USDC to Stream, representing 65% of its total deUSD reserves, with Stream using xUSD as collateral. When xUSD fell by more than 65%, the asset backing of deUSD collapsed instantly, triggering a massive run on the currency and a subsequent price crash. This run did not stop there. The panic selling subsequently spread to other similar yield-generating stablecoins such as USDX. In just a few days, the overall market capitalization of stablecoins evaporated by over $2 billion. A protocol crisis ultimately escalated into a market-wide liquidation, revealing not only design flaws but also demonstrating the high-frequency coupling between internal structures in DeFi, proving that risks are never isolated.

The Triple Test of Mechanism, Trust, and Regulation

When we review the de-anchoring cases of the past five years, we find a glaring fact: the biggest risk of stablecoins is that everyone assumes they are "stable".

When we review the de-anchoring cases of the past five years, we find a glaring fact: the biggest risk of stablecoins is that everyone assumes they are "stable".

From algorithmic models to centralized custody, from yield-generating innovations to hybrid cross-chain stablecoins, these pegging mechanisms can experience a stampede or go to zero overnight. This is often not due to design flaws, but rather a collapse of trust. We must acknowledge that stablecoins are not just products, but a mechanism-based credit structure built on a series of assumptions that "will not be broken." 1. Not all pegs are reliable. Algorithmic stablecoins often rely on governance token buyback and minting mechanisms. Once liquidity is insufficient, expectations collapse, and the governance coin plummets, the price will fall like dominoes. Fiat reserve stablecoins (centralized): They emphasize "dollar reserves," but their stability is not entirely detached from the traditional financial system. Bank risk, custodian risk, liquidity freezes, and policy fluctuations can all erode the "promise" behind them. Even when reserves are sufficient but redemption capacity is limited, the risk of de-anchoring still exists.

Yield-generating stablecoins:These products integrate yield mechanisms, leverage strategies, or multiple asset portfolios into the stablecoin structure, bringing higher returns but also hidden risks. Their operation relies not only on arbitrage paths but also on external custody, investment returns, and strategy execution.

2. The risk transmission of stablecoins is much faster than we imagine

The collapse of xUSD is the most typical example of the "transmission effect": one protocol has a problem, another uses its stablecoin as collateral, a third designs a stablecoin with a similar mechanism, and they are all dragged down.

Especially in the DeFi ecosystem, stablecoins serve as collateral, counterparties, and liquidation tools. Once the "anchor" weakens, the entire chain, the entire DEX system, and even the entire strategy ecosystem will be affected. 3. Weak Regulation: Regulatory Gaps Still Underway Currently, Europe and the US have successively introduced various draft regulations: MiCA explicitly denies the legal status of algorithmic stablecoins, and the US GENIUS Act attempts to regulate reserve mechanisms and redemption requirements. This is a positive trend; however, regulation still faces the following challenges: The cross-border nature of stablecoins makes complete regulation by a single country difficult. The complexity of the models and the high degree of interconnectivity between on-chain and real-world assets mean that regulatory agencies have not yet reached a consensus on defining their financial and liquidation attributes. Information disclosure is not yet fully standardized; while on-chain transparency is high, the responsibilities of issuers, custodians, etc., remain somewhat ambiguous. The crisis brings opportunities for industry restructuring. The crisis of stablecoins de-anchoring not only reminds us of the risks of the mechanism, but also forces the entire industry towards a healthier evolutionary path. On the one hand, the technology is proactively addressing past vulnerabilities. For example, Ethena is adjusting its collateral ratio and strengthening monitoring, attempting to mitigate volatility risk through proactive management. On the other hand, industry transparency is continuously improving. On-chain audits and regulatory requirements are gradually becoming the foundation of the next generation of stablecoins, which helps increase trust. More importantly, user awareness is also evolving. More and more users are beginning to pay attention to the underlying mechanisms, collateral structures, and risk exposures of stablecoins. The focus of the stablecoin industry is shifting from "how to grow quickly" to "how to operate stably." After all, only by truly ensuring resilience against risks can we create financial instruments that can truly support the next cycle.