USDT vs USDC: what happens to your balance if a stablecoin depegs
What a depeg is, what happened when USDT and USDC briefly fell below $1, and how a depeg shows up in your balance and net worth.
LedgerVault team · · 5 min readUSDT (Tether) and USDC (Circle) are the two biggest dollar stablecoins. Both aim to stay worth exactly $1. Most of the time they do, but "most of the time" isn't "always". Here's what a depeg is, what's happened before, and what it means for the balance you see.
What a depeg is
A stablecoin is "pegged" when it trades at, or very close to, $1. It depegs when the market price moves noticeably away from $1, usually down, because people start doubting it can be swapped back for a full dollar.
Two real examples
- USDT, May 2022. After the TerraUSD stablecoin collapsed, USDT fell as low as about $0.95 on some exchanges on 12 May 2022. It was back near $1 later that day, while Tether said it had processed over $2 billion of redemptions.
- USDC, March 2023. Circle disclosed that $3.3 billion of the roughly $40 billion of reserves backing USDC was held at Silicon Valley Bank, which had just failed. USDC dropped to around $0.88 on 11 March 2023. It recovered to about $1 within days, after US authorities said SVB's depositors would be protected.
USDT and USDC: the main differences
| USDT | USDC | |
|---|---|---|
| Issuer | Tether | Circle |
| Aims to be worth | $1 | $1 |
| Backed by (issuer's statements) | Reserves including cash, US Treasury bills and other assets | Cash and short-term US Treasuries |
| Biggest past dip | About $0.95 (May 2022) | About $0.88 (March 2023) |
Issuers publish reserve reports on their own websites, so check the latest ones if this matters to you.
What happens to your balance in a depeg
The number of coins you hold doesn't change. If you hold 10,000 USDC, you still hold 10,000 USDC. What changes is what they're worth: at $0.88, 10,000 USDC is worth $8,800 until the price recovers.
Whether you see that depends on your app:
- Apps that assume $1 per coin keep showing $10,000, even while the market says otherwise.
- Apps that use the live market price show the dip as it happens, so your net worth stays honest.
Sensible habits if you hold stablecoins
- Know where each balance sits: which exchange, which wallet.
- Remember they aren't bank deposits and aren't covered by deposit protection.
- Track them at their market price, not an assumed $1.
How LedgerVault values stablecoins
LedgerVault's stablecoin tracker shows USDT and USDC next to your bank balance, valued at their live market price, so if one slips below its peg your total shows it. For how stablecoins fit into the bigger picture, read are stablecoins cash?