Many stablecoins were designed to offer calm in the stormy waters of crypto, some even promised to hold steady no matter what happened around them. They were meant to be the digital equivalent of a dollar, euro, or other fiat currency. But behind the scenes, several of these so-called safe coins are quietly slipping away from their target value.
A stablecoin is only as stable as the mechanisms backing it. Some rely on fiat reserves, others on crypto collateral, and others use algorithmic formulas to hold the peg. When those systems are tested under pressure, they do not always work as intended. This year, a handful of coins have been showing slow but persistent signs of depegging.
What to Stay Away from?
- USDN (Neutrino USD)
Neutrino USD was once one of the top algorithmic stablecoins, closely tied to the Waves blockchain ecosystem. It was designed to maintain a one-to-one peg with the US dollar through smart contracts and incentives. However, throughout 2023 and into 2024, the coin has struggled to hold its peg.
The collapse of Waves liquidity and declining confidence in the broader Neutrino protocol caused USDN to drift far from its target. At times, it has traded below 70 cents. Efforts to recover have included buyback programs and ecosystem reforms, but trust has been hard to regain. While still active, USDN serves as a cautionary tale about the risks of algorithmic stability.
- USDD (Decentralized USD)
Launched by the Tron network, USDD claimed to offer a new kind of decentralized stability. It was partially collateralized with assets like TRX and Bitcoin, with the promise that the value would be kept near a dollar. However, even small shifts in the market started pulling the peg away from its target.
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Despite being backed by the Tron DAO Reserve, USDD has repeatedly dropped below $1, sometimes staying under the peg for days or weeks. Critics point to the lack of full collateral and overreliance on affiliated assets. While not as dramatic as other collapses, USDD has lost its image as a truly safe digital dollar.
- VAI (Venus Protocol)
VAI is the native stablecoin of the Venus lending platform on Binance Smart Chain. It is supposed to be overcollateralized with crypto assets provided by users who borrow and lend within the ecosystem. For a while, it worked as expected, but small issues began to pile up in recent months.
Fluctuations in the value of collateral, limited redemption mechanisms, and uneven liquidity have made it difficult for VAI to stay pegged. Though it usually trades close to $1, even slight and repeated deviations have drawn attention. For a stablecoin that is supposed to serve DeFi users, those swings raise questions about the protocol’s long-term reliability.
- USDX (Kava)
Kava’s USDX stablecoin was designed to operate within the Kava DeFi ecosystem. It uses overcollateralized loans to maintain its value. In theory, this offers strong protection against market volatility. In practice, USDX has had repeated difficulties holding the peg under stress.
- Magic Internet Money (MIM)
Magic Internet Money, issued by the Abracadabra protocol, stood out for its playful branding and flexible borrowing model. Users could mint MIM using various interest-bearing crypto assets as collateral. It was one of the first to allow DeFi users to unlock yield while also minting stablecoins.
But over time, MIM’s exposure to risky assets and projects led to instability. After several high-profile DeFi collapses affected its collateral base, MIM began to depeg. Though it still hovers near $1 in most markets, confidence has weakened, and liquidity has become patchy. The name might be funny, but the risks are very real.
What to Watch Going Forward?
Transparency is key for stablecoins. Projects that clearly publish their reserves, offer redemption options, and maintain strong liquidity are more likely to hold up. Watch how these coins react in volatile markets. If they continue to slip even when conditions are calm, that is a sign of deeper issues.
Also, pay attention to whether any changes are being made in response to the depegs. Are protocols updating their models or just staying quiet? Community involvement, developer activity, and ecosystem support all matter when evaluating long-term viability. Stability is not just a number, it is a result of careful design and constant attention. Some coins pretend to be safe, but they are quietly losing ground one cent at a time.
