Browse Definitions:
Definition

pegged cryptocurrency

Contributor(s): Ivy Wigmore

A pegged cryptocurrency is an encryption-secured digital medium of exchange whose value is tied to that of some other medium of exchange, such as gold or the currency of a given nation. Once the exchange rate is established between the currencies (usually 1:1), the value of the cryptocurrency fluctuates in the same direction and to the same degree as the currency to which it is pegged.

Unpegged cryptocurrencies are notoriously volatile, due to marketplace perceptions of risk and other factors. The price of Bitcoin, for example, has been recorded to fluctuate at ten times the rate of the United States dollar (USD). After a 40 percent drop in the cryptocurrency's price over a weekend in December 2017, there was speculation that the small amount of Bitcoin in circulation might have been suddenly and significantly increased by a single trader making a relatively large amount available and thus affecting the balance of demand and supply. Pegging a cryptocurrency to a more stable asset is designed to protect it from rapid and significant changes in value that could have a negative impact on anyone holding or trading in the currency.

Most pegged cryptocurrencies are based on the United States Dollar because it is the dominant currency in the global financial sector. Tether's USDT (US dollar tether), for example, maintains the same value as $1 USD. Cryptocurrencies can also be linked to other types of assets, such as gold and the currencies of other countries.  

To be pegged to a specific type of asset, the owners of cryptocurrencies must hold a value in the asset they are pegged to that is sufficient to provide a guarantee. Essentially, that requirement ensures that if the owners were required to convert all of the cryptocurrency to the other type of asset, they would be able to do that.  

This was last updated in December 2017

Continue Reading About pegged cryptocurrency

Join the conversation

1 comment

Send me notifications when other members comment.

By submitting you agree to receive email from TechTarget and its partners. If you reside outside of the United States, you consent to having your personal data transferred to and processed in the United States. Privacy

Please create a username to comment.

What advantages and disadvantages do you see arising from pegging cryptocurrency values to the price of gold?
Cancel

-ADS BY GOOGLE

File Extensions and File Formats

Powered by:

SearchCompliance

  • smart contract

    A smart contract, also known as a cryptocontract, is a computer program that directly controls the transfer of digital currencies...

  • risk map (risk heat map)

    A risk map, also known as a risk heat map, is a data visualization tool for communicating specific risks an organization faces. A...

  • internal audit (IA)

    An internal audit (IA) is an organizational initiative to monitor and analyze its own business operations in order to determine ...

SearchSecurity

SearchHealthIT

SearchDisasterRecovery

  • incident management plan (IMP)

    An incident management plan (IMP), sometimes called an incident response plan or emergency management plan, is a document that ...

  • crisis communication

    Crisis communication is a method of corresponding with people and organizations during a disruptive event to provide them with ...

  • Zerto

    Zerto is a storage software vendor that specializes in enterprise-class business continuity and disaster recovery in virtual and ...

SearchStorage

  • SSD write cycle

    An SSD write cycle is the process of programming data to a NAND flash memory chip in a solid-state storage device.

  • data storage

    Data storage is the collective methods and technologies that capture and retain digital information on electromagnetic, optical ...

  • hard disk

    A hard disk is part of a unit -- often called a disk drive, hard drive or hard disk drive -- that stores and provides relatively ...

SearchSolidStateStorage

  • hybrid hard disk drive (HDD)

    A hybrid hard disk drive is an electromechanical spinning hard disk that contains some amount of NAND Flash memory.

Close