Stablecoins & Risk
A Dollar Peg Does Not Guarantee Stable Purchasing Power
A token may target the dollar’s nominal value, while the amount that dollar buys changes with price levels. Learn the difference between a peg and purchasing power.
What does a peg measure?
When a digital token aims to track the dollar, the comparison is generally with the reference currency’s nominal value. That does not mean the amount of goods and services a dollar buys stays fixed; price levels and purchasing power change over time.
A different question from depegging
A price near the nominal reference does not answer a question about purchasing power. Conversely, a change in the dollar’s purchasing power does not by itself show that a token has lost its peg. Each question uses a different measure and source of data.
A simple example
Hypothetically, a digital balance may remain near the nominal value of a dollar while the cost of a good or service rises over time. The peg’s definition has not changed in this example, but what the amount can buy has.
Key takeaway
Separate a token’s price against the dollar from the dollar’s own purchasing power. A peg does not guarantee fixed real value or remove issuer, market, or redemption risks.
Related reading
Official sources
This article is for informational purposes only and is not a price quote.