NYDIG challenges the myth that stablecoins are pegged to the U.S. dollar, highlighting the instability of assets like USDC, USDT, and USDe, which dropped to $0.65 on Binance during a $500 billion crypto market sell-off.

These tokens float based on market supply and demand, not fixed pegs. NYDIG’s Global Head of Research emphasized that stablecoins are market-traded instruments whose prices fluctuate around $1.00 due to trading dynamics.

Terms like “peg” imply a guarantee that doesn’t exist. Stability is maintained through arbitrage: traders buy below $1 and sell above, with issuers adjusting token supply accordingly. However, this system can break down during panics, leading to asset collapses.

The fragmented ecosystem can result in real-time failures of widely used assets, causing users to misunderstand risks. During the crash, lending markets outperformed, with Aave liquidating only $180 million of collateral, while NYDIG avoided losses entirely.

Read more at Yahoo Finance: Stablecoins’ $1 Peg Is a ‘Misconception,’ Says NYDIG After $500 Billion Market Meltdown