Ethena's USDe stablecoin plunged 35% in minutes during a historic crypto liquidation wave. While other protocols might have collapsed, USDe stood strong, showcasing its resilience in a stress test that unveils the strengths and weaknesses of synthetic stablecoins.
The USDe depeg wasn’t related to a fundamental collateralization problem, but rather to a liquidity crisis in secondary markets. Alex Krüger, a recognized crypto trader and economist, pointed out that tokens with lower trading volume on centralized platforms such as ENA didn’t suffer as much and quickly recovered from the fall.
The price divergence between different platforms reveals market fragmentation during periods of extreme stress. Binance and Bybit displayed prices reflecting real-time transactions around $0.65, while lending protocols like Aave maintained USDe pegged at $1 in their oracles. This valuation difference created partial protection for some users, but also amplified confusion about the actual value of the asset.
Ethena’s economic model relies on a cash and carry strategy, using short positions in derivatives markets to neutralize directional exposure of its crypto collateral. During a liquidation cascade of this magnitude, this mechanism is severely tested, as price gaps between spot and futures abruptly disappear.
The ENA governance token suffered an even more violent correction, plunging by up to 40% before beginning to rebound. At the time of writing, ENA still shows a decline of nearly 25% over 24 hours, reflecting investors’ temporary loss of confidence in the protocol despite its technical resilience.
Binance has announced it is carefully examining affected accounts and liquidations, as well as appropriate compensation measures. This initiative recalls recurring debates about exchange responsibility during extreme market events, especially when their risk management systems contribute to amplifying price movements.
Trump’s announcement triggered a massive flight to traditional safe havens like gold and US Treasury bonds, temporarily draining liquidity from crypto markets. This generalized risk-off phenomenon explains why even theoretically stable assets like USDe experienced intense selling pressure. The speed of peg recovery suggests, however, that arbitrageurs quickly identified the profit opportunity by buying discounted USDe to resell it at $1 via the protocol’s native redeem mechanism.
After a marked drop of more than 25% over 24 hours, the ENA token is trading around $0.33. For many analysts, this pullback phase represents a unique opportunity. Savvy investors see this decline as an ideal entry point before a potential rebound toward previous highs.
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This episode demonstrates that even well-designed stablecoins are not immune to market dislocations during major macroeconomic events. Ethena’s overcollateralization and stabilization mechanisms worked as intended, but the drop to $0.65 reveals insufficient market depth during volatility peaks.
For USDe holders seeking yield, this incident raises questions about the risk-reward trade-off. A yield of 5.5% remains attractive in the current environment, but the possibility of a temporary 35% depeg constitutes a significant liquidity risk for those who might need to exit urgently during a crisis.
The crypto market survived its largest liquidation day in absolute value, partially validating the growing maturity of the underlying infrastructure. However, coordination between exchanges, DeFi protocols, and price oracles remains a weak link that will need to be strengthened to prevent such distortions from creating exploitation opportunities or unjustified losses for users.
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