Peg
A target price that an asset aims to maintain, typically $1 for stablecoins or 1:1 for wrapped/synthetic assets.
In-Depth Explanation
Maintaining a peg requires active mechanisms: arbitrage incentives, collateral backing, or algorithmic supply adjustments. When demand exceeds supply, the asset trades above peg; when supply exceeds demand, below peg. Small deviations are normal; large or sustained depegs indicate mechanism failure or loss of confidence.
Related Terms
Stablecoin
A cryptocurrency designed to maintain a stable value relative to a reference asset, typically the US dollar.
Depegging
When a pegged asset loses its target price, trading significantly above or below its intended value.
Arbitrage
Profiting from price differences of the same asset across different markets or venues.
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