NYDIG is calling time on what it says is one of crypto’s most persistent myths: that stablecoins are tied to the US dollar.
In a post-mortem of last week’s $500 billion crypto market selloff, the bitcoin-focused financial services firm’s global head of research Greg Cipolaro pointed to the volatility of supposedly stable assets like USDC, USDT and Athena’s USDe, which fell as low as $0.65 on Binance.
The price fluctuations revealed that these tokens do not operate on fixed pegs, but rather float based on market supply and demand.
“Stablecoins are not pegged to $1.00. 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 like “point” imply a warranty that does not exist. What appears to be stability is actually just arbitrage: traders buy when the coin falls below $1 and sell when it rises above, with issuers offering mechanisms to create or redeem tokens in response to those moves.
When panic strikes, that system can collapse. USDT and USDC traded above $1 during the crash, while USDe, which uses derivative positions to remain “delta neutral” and generate returns, collapsed. While it fared worse on Binance — which later compensated users as a result — it also saw significant declines on other major exchanges.
The result, he added, is a fragmented ecosystem where even heavily used assets can fail in real time and where users misunderstand the actual risks.
An outperformer during the crash was the lending markets. Leading DeFi protocol Aave liquidated just $180 million in collateral, or 25 bps of its total value locked up. NYDIG itself suffered no losses.
