GHO Peg Stability
As a Crypto-Collateralized stablecoin, GHO is designed to maintain a $1.00 peg at all times. Peg stability is the most critical metric for any stablecoin — a persistent de-peg can trigger a loss of confidence, mass redemptions, and cascading liquidations in DeFi protocols that depend on the token.
How GHO Maintains Its Peg
Aave v3 users with sufficient collateral deposited can mint GHO at a governance-set borrow rate (currently around 6–8% APY). GHO is minted when users open a GHO borrow position and burned when they repay. The over-collateralization ratio is determined by Aave's existing risk parameters for each collateral asset. Facilitators — other protocols approved by Aave governance — can also mint GHO against different collateral types (e.g., FlashMinter for flash loan arbitrage). GHO holders can stake in the Aave Safety Module as stkGHO, which earns AAVE token rewards and is the primary liquidity backstop.
Common De-peg Causes
During extreme market volatility, selling pressure on GHO can exceed available buy-side liquidity on exchanges. This causes temporary downward deviations until arbitrageurs step in to buy discounted tokens and redeem for $1 from Aave DAO.
Negative news about Aave DAO, questions about reserve adequacy, or regulatory actions can cause holders to sell, pushing GHO below $1.00 on secondary markets even if reserves are fully intact.
Failures of other stablecoins (e.g., UST/Luna collapse) or crypto lenders can cause panic selling across all stablecoins, including GHO, as holders flee to fiat. These events typically resolve as GHO's peg mechanism operates.
Monitoring the Peg
Track GHO peg deviations in real-time using the BTC.PH Depeg Monitor. Set alerts for deviations below $0.995 or above $1.005 to react quickly to potential instability.