When a stablecoin isn't
quite stable

The promise of a stablecoin

A stablecoin is a cryptocurrency designed to hold a steady value — usually pegged to the US dollar at a 1:1 ratio. One USDC should equal one dollar. One USDT should equal one dollar. That's the whole point: you get the speed and openness of crypto without the price swings of Bitcoin or Ethereum.

For merchants, stablecoins are often the most comfortable entry point into Bitcoin payments. A stablecoin shows up as $1.00 per coin, so you'd always know exactly what you're getting. Simple.

But sometimes that $1.00 peg slips. A stablecoin might trade at $0.998, or $0.991, or — in rare and serious cases — much lower. This is called decoupling or a depeg.

Is it cause for alarm? Sometimes yes, sometimes no. The answer depends entirely on why it happened — and how stablecoins are built in the first place.

We've been here before — with actual dollars

Here's something most people don't know: the US dollar itself used to be pegged to something. From 1944 through 1971, the dollar was part of the Bretton Woods system — a global agreement that fixed the dollar's value to gold at $35 per ounce, and pegged other world currencies to the dollar.

In August 1971, President Nixon ended the dollar's convertibility to gold. The dollar "decoupled" from its peg. This became known as the Nixon Shock.

Did the dollar collapse? No. Did the financial system end? No. The dollar remained the world's reserve currency. What changed was the mechanism backing its value — from gold reserves to government credibility, economic output, and global trust.

The parallel to stablecoins is imperfect but instructive. Decoupling isn't automatically catastrophic. The question is always: what is backing this thing, and is that backing still intact?

Why does decoupling happen?

Not all depegs are created equal. There are a few distinct causes, and they matter a lot.

1. Market pressure and temporary imbalances

In fast-moving markets, stablecoins can drift slightly from $1.00 — sometimes trading at $0.998 or $1.002 — simply because of supply and demand imbalances on exchanges. This is normal market friction. Arbitrageurs (traders who profit from small price differences) typically correct these gaps within minutes or hours. If you see USDC at $0.999 on a price chart, that's not a crisis. That's a rounding error in action.

2. Confidence crises and bank runs

More serious depegs happen when people lose confidence in the stablecoin and rush to redeem it all at once. This is the crypto equivalent of a bank run. Even a well-backed stablecoin can experience temporary price pressure if a large number of holders try to exit simultaneously — not because the reserves are gone, but because the exit queue is longer than the market can absorb instantly.

3. Reserve problems — the real danger

The genuinely dangerous scenario is when a stablecoin depegs because its reserves are actually insufficient to back redemptions. This is what happened with TerraUSD (UST) in May 2022 — a stablecoin that wasn't backed by real dollar reserves but by an algorithmic mechanism that ultimately collapsed. That was a real, catastrophic failure. UST lost its peg permanently and went to nearly zero.

The major stablecoins, explained

USDC and USDT are both fiat-backed stablecoins. Understanding how they work — and how they can lose their peg — helps you calibrate the risk.

USDC (USD Coin)

Issued by Circle, USDC is one of the most regulated and transparent stablecoins available. Circle publishes monthly attestations from major accounting firms confirming that reserves match or exceed the number of USDC in circulation. Those reserves are held in cash and short-term US Treasury securities — among the safest assets in the world.

USDC did experience a brief depeg in March 2023, dropping to around $0.87 at its lowest point over a weekend. The cause: Circle had a portion of its reserves held at Silicon Valley Bank, which failed that Friday. Over the weekend, with banks closed, uncertainty spiked. By Monday, when the FDIC guaranteed SVB deposits, USDC returned to $1.00. The peg was temporary and caused by a liquidity scare, not a reserve shortfall. Total reserves were always sufficient — the question was timing of access.

USDT (Tether)

Tether is the oldest and largest stablecoin by market cap. Its reserve transparency has historically been less thorough than USDC's, which has led to more skepticism over the years. Tether has periodically drifted slightly from $1.00 during market stress events. Despite this history, it has maintained its peg through multiple market cycles and remains widely used globally.

What the Nixon Shock actually teaches us

When Nixon ended the dollar's gold convertibility in 1971, the immediate reaction was fear and uncertainty. Markets wobbled. Gold prices soared. The fixed exchange rate system that had structured global finance for 27 years was gone overnight.

But the dollar survived — and thrived. Why? Because the underlying economy it represented was real. American productivity, institutions, rule of law, and global trade relationships gave the dollar value independent of gold. The peg was a mechanism, not the substance.

The lesson for stablecoins: a temporary depeg is a stress test of the mechanism. What matters is whether the substance — the actual reserves, the issuer's credibility, the regulatory oversight — remains solid. For USDC and USDT, that substance has held through multiple stress events. For TerraUSD, the substance turned out not to exist.

What this means for you as a merchant

OrangeTill accepts Bitcoin and the Lightning Network — not stablecoins — so a depeg can't touch the money moving through your till. Still, your customers hold and mention stablecoins, so here's how to think about them:

• Stick to well-established stablecoins. USDC and USDT have multi-year track records, large market caps, and have weathered multiple market crises. New or obscure stablecoins carry substantially higher risk.
• Convert to dollars promptly if you're risk-averse. If you're worried about even temporary depegs, convert USDC to dollars in your bank account after each transaction or at the end of each day. Many merchants do this routinely.
• A brief dip doesn't mean disaster. If you see USDC at $0.998, that's not worth a second thought. If you see it at $0.87 over a weekend, check the news before taking any action — the cause matters more than the number.
• Algorithmic stablecoins are a different animal. OrangeTill doesn't support algorithmic stablecoins — or any stablecoins, in fact. It keeps things simple with Bitcoin and the Lightning Network.

The bottom line

Stablecoin decoupling is real, it happens, and in rare cases it can be serious. But the panic-first reaction that makes headlines every time a stablecoin trades at $0.997 misses important context. The history of money — including the dollar itself — is full of pegs, breaks, and rebuilds. What survives those moments is the substance underneath.

Because OrangeTill keeps you on Bitcoin and the Lightning Network, a stablecoin depeg never touches your till at all. The risk you actually manage is Bitcoin's short-term volatility between receiving a payment and converting it — which is why a clear conversion strategy matters more than obsessing over any peg.

Understand your tools. Know what backs the stablecoins you accept. Convert promptly if you prefer certainty. And don't let a two-cent fluctuation in a chart make you second-guess a legitimate, useful payment method.