Lessons from the 2023 USDC Depeg
In March 2023, USDC, a stablecoin with over $40 billion in circulation, did the unthinkable.
It broke its peg.
Instead of trading at $1, it dropped as low as $0.87. On-chain. In real time. A "safe" asset suddenly didn't feel so safe.
This wasn't a rug. It wasn't a hack.
It was a liquidity shock rooted in the very traditional systems stablecoins claim to improve on.
Let's walk through it.
What Even Is USDC?
Think of USDC as digital dollars. They are tokens that are supposed to always be redeemable for real dollars, 1:1.
To maintain that promise, Circle (the issuer) holds reserves. Mostly U.S. Treasuries. Some cash in banks.
Simple in theory, but in this case, turned out to be fragile in practice.
What Triggered the Crash?
Silicon Valley Bank (SVB) collapsed in March 2023.
Circle had $3.3 billion of USDC reserves, about 8%, parked there.
As word spread, people got nervous:
"What if that money is gone? Is USDC really backed?"
They began swapping USDC for other assets.
Price dropped. Liquidity vanished.
The peg broke.
Eventually, regulators guaranteed all SVB deposits.
USDC bounced back.
But the moment couldn't be unseen.
Why It Mattered
The depeg exposed something deeper:
Stablecoins aren't magic.
They're IOUs backed by systems we pretend are stable.
- Bank deposits (which can be frozen)
- Government debt (which can lose value)
- Financial institutions (which can collapse overnight)
USDC wasn't the problem.
The problem was the illusion -- the belief that these assets are invincible.
Stability Isn't a Feature. It's a Bet.
The truth is: we've built an entire category of "stable" coins on top of unstable foundations.
Treasuries? Great... unless interest rates spike.
Banks? Solid... until they're not.
Fiat? Useful... but long-term debased by design.
Every peg is a performance.
A collective agreement to believe that $1 today equals $1 tomorrow -- even as the world burns around it.
That's not stability. That's coordinated illusion.
So What's the Alternative? Just Embrace Chaos?
The Unstable meme says:
Stop pretending things are stable when they're not.
It's about honesty.
About building systems that don't hide their fragility.
About building systems that don't hide their fragility.
About creating assets that own their volatility, instead of faking safety.
Sometimes the most transparent asset isn't the one that claims to be stable…
It's the one that admits it isn't.
Last Words
The 2023 USDC depeg didn't destroy stablecoins.
But it revealed a truth:
Even the safest-seeming crypto assets are only as stable as the world around them.
And that world?
Isn't as stable as we'd like to think.
Maybe the answer isn't to fear instability.
Maybe it's to understand it and build with it in mind.
That's what Unstable is about.
Not chaos for chaos' sake.
But clarity, in a world that keeps selling comfort.