A Status Report on Stablecoins: Where the Peg Actually Holds
The state of the dollar peg across USDT, USDC, DAI and the algorithmic graveyard — what 'stable' means in 2026, and how you'd know if it stopped being true.
Every stablecoin is a promise: one token, one dollar, redeemable, always. This report is our periodic check on whether that promise is being kept — and, more usefully, how each design keeps it.
The current board
As of mid-2026, the board reads: fiat-backed stablecoins operational, crypto-collateralized DAI operational, algorithmic designs extinct in the wild. The combined market capitalization of stablecoins sits above $230 billion — larger than the deposits of most national banking systems — and roughly 92% of it is backed by cash and short-term US Treasuries held by regulated custodians.
That was not always the consensus. In 2021, algorithmic designs were a growth category. Then came May 2022.
How each design holds
USDT (Tether) holds its peg through market arbitrage plus the issuer’s redemption promise, backed by reserves that are now predominantly US Treasury bills. The controversies — reserve transparency, the Bitfinex relationship, regulatory settlements — are real and documented. The peg mechanics, however, have survived every stress test thrown at them since 2015.
USDC (Circle) is the audit-first design: monthly reserve attestations by a major accounting firm, regulated issuers, redemption through banking partners. Its one logged incident — the March 2023 dip to ~$0.87 during the Silicon Valley Bank failure — is instructive: the peg broke because of where the dollars sat, not the design itself, and healed within days once the FDIC backstopped depositors.
DAI (MakerDAO) holds its peg through overcollateralization enforced by smart contract: to mint $100 of DAI you must lock more than $100 of approved collateral, and if that collateral’s value falls, the protocol liquidates it. No company’s honesty is required — only the code’s. Governance has since added real-world assets, including Treasuries, to the collateral mix.
The graveyard
NuBits (depegged 2016, collapsed 2018) and Terra/UST (collapsed May 2022, ~$60 billion destroyed) both relied on algorithmic supply mechanics — mint-and-burn relationships with a sibling token — instead of verifiable reserves. Both failed the same way: confidence wobbled, the reflexive loop reversed, and there was nothing external to catch the price.
How you’d know if it stopped being true
Watch three signals: the secondary-market price on major exchanges (a sustained deviation beyond 0.5% is an incident, not noise), the issuer’s reserve disclosures (frequency and auditor quality matter more than the headline number), and redemption behavior (whether large holders can actually exit at $1). One of these flashing is a yellow status. All three flashing at once is how May 2022 started.
Bottom line: the peg holds where it is backed by something you can audit and redeem. That is a boring answer. Boring, in this industry’s history, is the feature.