Stablecoin Depeg Explained: Why Pegs Break and Recover

One week you’re parking funds in a dollar stablecoin without a second thought. The next, a chart goes vertical the wrong way and a supposedly steady $1 starts blinking 0.97, 0.92, 0.41. We saw that movie again in July.

On July 22, the algorithmic Balance Coin (BLC) cratered roughly 99.75% after a reported BTCB oracle manipulation tied to the 42DAO exploit, with about $912k–$915k drained, according to security firms cited by TechTimes (reporting SlowMist / PeckShield findings). A week earlier, the Arbitrum-based perps venue Ostium paused trading after an oracle-related exploit siphoned roughly $18 million in USDC from its OLP vault, per The Block.

Meanwhile, the big fiat-backed names barely flinched. As of July 29, DeFiLlama shows around $308.45 billion in stablecoins, with USDT near 59.6% dominance and USDC roughly $72.4B, and both trading essentially on peg, while some smaller coins drifted wider, like Falcon USD at about 0.52% below $1 (DeFiLlama).

Stablecoins promise $1 stability, but they’re not all playing the same game. Fiat-backed issuers defend pegs with cash-like reserves and redemption windows. Overcollateralized designs lean on crypto collateral and governance switches. Algorithmic coins rely on incentives and arbitrage that can vanish under stress.

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