What Is a Pegged Currency? How Stablecoins Maintain a Stable Price
A pegged currency is one whose value is fixed to another asset, such as the US dollar, gold, or a basket of reserves. In crypto, pegging is the mechanism that keeps stablecoins like USDT and USDC locked at $1. The peg is maintained through reserve backing, arbitrage incentives, or algorithmic supply adjustments depending on the stablecoin's design. As of April 2026, the total stablecoin market cap exceeds $318 billion, with USDT alone accounting for over $184 billion of that figure. When pegs hold, stablecoins function as the backbone of crypto trading and DeFi. When they break, the consequences can be devastating, as the $40 billion Terra UST collapse in 2022 demonstrated.
