Do I still earn staking rewards during a depeg?

Yes. Validators keep earning rewards regardless of what the LST is trading at on secondary markets. The depeg affects market price, not the underlying stake.

Should I sell my LST during a depeg?

Selling locks in the loss. If the protocol is solvent and redemptions are working, most past depegs have restored within days to weeks. If you can wait, waiting has usually been the right call.

How big can a depeg get?

stETH traded around 0.94 ETH in mid-2022. mSOL and others have seen gaps of a few percent. Depeg size depends on how forced the selling is and how easy redemption is at the time.

What if the protocol never restores the peg?

If redemptions are permanently broken because of an exploit or insolvency, the discount can become permanent. That's why smart-contract risk and operator risk matter so much when picking a protocol.

Are rebasing and value-accruing tokens affected the same way?

Both can depeg. Rebasing tokens accrue rewards as an increasing balance; value-accruing tokens accrue as a rising redemption rate. In either case, market price can still detach during panic.

Does a depeg mean the protocol was hacked?

Not necessarily. Most historical depegs came from forced selling or paused withdrawals, not exploits. Always confirm the cause from protocol channels before acting.

Can arbitrage always fix a depeg?

Only if redemptions are open and traders can move funds in size. When redemptions are paused or the queue is long, arbitrage slows and the gap can persist longer.

What Happens to Liquid Staking Rewards During a Depeg

A depeg is one of the more misunderstood events in liquid staking. When stETH slipped to around 0.94 ETH in mid-2022, headlines made it sound like the token had broken. It hadn't — validators kept validating, rewards kept landing, and the peg returned once redemptions opened up after the Ethereum upgrade. But the panic was real, and people who sold at the bottom took real losses.

So what actually happens to your rewards during a depeg? The short answer: they keep coming. The longer answer needs a little more care, because there are two different things called "value" in a liquid staking token, and only one of them wobbles.

Two different prices in one token

Every liquid staking token has two numbers you can track:

Redemption value. How much of the underlying asset one token represents. This is set by the protocol from validator balances. It only moves up over time as rewards land — barring slashing or exploits.
Market price. What someone will pay for the token on a DEX or exchange. This is set by supply and demand, and can fall below redemption value during panics.

A depeg is a gap between those two. It doesn't mean your stake has vanished. It means the market is discounting your claim, usually because redemptions are backed up or people just want out fast. Rewards, which are baked into the redemption value, keep accruing the whole time. Our page on how staking rewards work covers the base mechanic.

What happens to rewards in practice

Here's the sequence for a rebasing token like stETH:

Validators produce blocks and earn ETH rewards, same as always.
The Lido oracle reports validator balances to the smart contract.
Your stETH balance goes up slightly (usually daily).
Your stETH may still trade below 1 ETH on Curve — but you now hold more stETH than you did yesterday.

For a value-accruing token like rETH, cbETH, or mSOL:

Validators earn rewards.
The redemption rate reported by the protocol rises.
Your rETH balance is unchanged, but each rETH now redeems for more ETH.
The market price of rETH may still trade below the fair redemption value.

Either way, the reward machine keeps running. The depeg is a market-side issue, not a staking-side issue.

Why depegs happen

Depegs usually come from one of a few triggers, often stacked:

Trigger	What it looks like
Frozen withdrawals	Redemptions paused (e.g., pre-Shapella stETH); market is the only exit
Large forced seller	A large fund unwinds a borrowed position and dumps LST onto a thin book
Market panic	Broad crypto crash pulls all correlated assets down
Exploit fear	Rumor or bug pushes holders toward the exit at once
Redemption queue	Withdrawals open but backlogged for days or weeks

When redemptions work and no exploit is confirmed, arbitrage traders usually close the gap: buy the discounted token, redeem it for full value, pocket the difference. That's the mechanism that has restored past depegs on stETH, mSOL and others.

The real risks during a depeg

The temporary discount only becomes a permanent loss if one of these things is true:

You sold at the discount because you needed liquidity right now.
The protocol is genuinely insolvent from a bug or exploit — see staking risks for more.
The redemption queue is long and you can't wait it out without margin-called positions liquidating.
You borrowed against the token at a high loan-to-value ratio and get liquidated as the price drops.

Rewards accrue right through all of this. It's the liquidity mismatch — needing to exit at market price faster than the protocol can redeem at fair value — that hurts.

How to handle your rewards during a depeg

Plain and boring works best. If you didn't borrow to buy in and you didn't need to exit right that day, doing nothing was the correct play in every past major depeg. Track redemption value against market price, watch for protocol communications, and confirm the depeg is a liquidity issue rather than an exploit before making a decision. If the position is a small share of your net worth and the fundamentals are intact, patience usually beats a panic sale. For a wider view of income options that don't rely on secondary markets, see crypto passive income ideas.

What Happens to Your Liquid Staking Rewards During a Depeg