A "depeg" is when a token that is supposed to maintain a fixed value (USD0 = $1, EUR0 = €1) temporarily trades away from that value on open markets. This article explains how depegs happen, what Usual does to prevent them, and what you should do if one occurs.
What a depeg looks like
A depeg usually looks like this:
USD0 trading at $0.995 or $1.005 on a DEX instead of exactly $1.00
EUR0 trading at €0.99 or €1.01 instead of exactly €1.00
A brief deviation, restored within minutes to hours as arbitrage kicks in
Small deviations of a few basis points are normal in all stablecoins. They are not a real problem unless they persist or widen.
Why depegs happen
Cause | What it looks like |
Sudden sell pressure | A large holder dumps their position on a DEX, pushing the price down temporarily |
Liquidity gap | A thin pool during low activity can see prices drift before arbitrage catches up |
Panic related to backing | Rumors or news about collateral providers cause a sell-off |
Technical issue | A bug or exploit causes markets to price in perceived risk |
Exchange delisting | Reduced access to a stablecoin on centralized exchanges |
What Usual does to prevent depegs
1. Primary market redemption at par. Anyone can always mint or redeem 1 USD0 for $1 worth of real assets at the primary market (via DaoCollateral or SwapperEngine). This is a hard floor.
2. Arbitrage incentives. When USD0 drifts below $1, arbitrageurs buy cheap USD0 on the market and redeem it at Usual for $1. This buys pressure the price back to $1. The opposite applies when USD0 trades above $1.
3. Mint routing optimization. The protocol intelligently routes small mint/redeem orders through secondary markets (Curve) when pricing is favorable, smoothing small deviations before they become visible.
4. Diversified collateral. USD0 is backed by multiple Treasury Bill providers (Hashnote, Spiko, M0). A failure at one provider does not break the full backing.
5. Audit and monitoring. Depeg events are detected quickly through on-chain monitoring and official status pages.
How arbitrage fixes a depeg
Example: USD0 drops to $0.995 on Curve.
An arbitrageur buys 1M USD0 on Curve for 995K USDC
They redeem 1M USD0 at Usual for real assets worth $1M
They convert back to USDC, ending with 1M USDC
Profit: 5,000 USDC, minus gas
The arbitrage buying pressure restores the price. In practice, this happens within seconds of the deviation becoming profitable.
When depegs become a real problem
Small, short-lived depegs are normal market behavior. Real problems arise when:
The deviation persists for hours or days
The depeg widens instead of narrowing
Primary market redemption is paused or unavailable
Collateral providers face serious operational issues
In those cases, the DAO and Usual Labs respond through official channels (docs status page, Discord announcements, governance proposals).
What to do if you see a depeg
Do not panic. Small deviations are normal.
Check the status page on docs.usual.money for any incident notices.
Check the primary market. If primary redemption still works at par, the depeg is a secondary market issue that will resolve.
If you need to exit and are willing to accept the discount, you can sell on the secondary market.
If you can wait, the arbitrage mechanism usually restores the peg within minutes.
Historical depeg events
Date | Event | Resolution |
January 2025 | bUSD0 (then USD0++) depegged to ~$0.89 after a floor adjustment announcement | Price recovered within days; floor was later adjusted via governance |
Full post-mortems are available on the governance forum.
What to remember
Depegs happen in every stablecoin, including the most established ones
Usual has multiple mechanisms to minimize them: primary redemption, arbitrage, routing, and diversified backing
Small, short-lived depegs are normal market behavior — not a crisis
Large or prolonged depegs are flagged through official channels
The backing is always the ultimate source of truth: if the real assets are safe, the peg will recover
Note: If you see USD0 trading more than a few basis points away from $1, check the status page first. Usual publishes incident updates through official channels whenever a notable deviation occurs.
Technical note (for DeFi users): The arbitrage path uses DaoCollateral and SwapperEngine as the primary redemption route, with Curve and Uniswap pools as secondary markets. Intelligent mint routing sends orders through Curve when a price-threshold factor τ indicates favorable conditions. See the litepaper for the full peg defense mechanism.
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