USDe d'Ethena loses more than 8 billion in market capitalization during the massive market crash

During an unprecedented wave of liquidations that shook the entire crypto ecosystem, Ethena’s synthetic stablecoin USDe experienced a dramatic collapse. Since October 10th, the token’s market value has plummeted significantly, dropping from $14.7 billion to approximately $6.4 billion according to the latest market data.

A Dazzling Plunge in the Markets

The liquidation event, the most violent ever recorded in cryptocurrency history, caused massive losses on a global scale. This collapse wiped out $1.3 trillion in total market value, while over $19 billion in trading positions were forcibly liquidated. In response to this turmoil, investors massively shifted towards traditional stablecoins deemed safer, abandoning high-yield assets for safe havens.

The Fragility of the Hedging Mechanism

The real issue with USDe lies in its fundamental architecture. Unlike traditional stablecoins backed by fiat reserves, USDe maintains its peg to $1 through a delta hedging system based on trading positions. This system proved highly vulnerable during extreme market conditions. During the crash, USDe dropped to as low as $0.65 on certain platforms, revealing the inadequacy of this stabilization mechanism.

The Risks of High Yield

These events remind us of a fundamental truth in financial markets: attractive returns are necessarily accompanied by proportionate risks. Instruments offering high interest rates often have unfavorable risk-return profiles, especially during periods of volatility. Experts emphasize that such products should never be considered safe havens, particularly during systemic market crises.