Loss of peg (depeg)

How it happens

1. 1 Identify how the asset seeks to keep the reference: reserves, redemption conditions and market incentives may take part in that mechanism.
2. 2 Difficulty redeeming, a change in confidence or selling pressure can move the market price away from the reference. The effect depends on the structure of the asset.
3. 3 To assess a contractual event, compare the price series with the margin and the window set out in the cover. Those conditions define how the request is classified, without turning every fluctuation into a claim.

An example, with no proper name

Imagine an asset whose mechanism depends on redemption with an issuer. A temporary restriction on the account used to pay redemptions can limit that access. Even if the declared reference stays the same, buyers and sellers may trade at different prices while they assess the restriction.

The example describes the mechanism, not a real incident. Concrete cases in this segment belong to the people who lived them, and presenting them here would suggest an involvement that did not happen.

What the impact is

The deviation changes the market value of the position and may result in a loss, according to its size, its duration and the conditions for exit. The peg may not recover; the name of the asset does not guarantee its value.

What reduces the exposure

• Read who may request redemption, on what conditions and which events allow it to be suspended. Trading the token on the market does not mean having direct access to the issuer.
• Examine the issuer, the reserves and the stabilisation mechanism. Seeking a peg does not automatically make the asset equivalent to a bank deposit.
• Compare price references, liquidity and redemption conditions. A price close to the reference at one moment does not describe the full capacity to exit.

What a claim in this family needs to prove

• The asset, the network and the position held at the time of the event.
• The price series for the public reference used in the cover contract.
• The protected address declared at purchase.

The exact requirement is the one in the published version of the purchased coverage contract. This list is what is usually necessary in this family.