Ethena’s USDe Shrinks by $8.3B as Traders Flee Risky Stablecoins

Core Insights - Ethena's synthetic dollar USDe has decreased from approximately $14.7 billion to around $6.4 billion in just over two months following the October 10 crypto crash, marking an $8.3 billion exit as traders shift towards simpler, fiat-backed stablecoins [1] - The October 10 crash triggered the largest liquidation event in crypto history, resulting in over $19 billion in positions disappearing and the market losing about $1.3 trillion in value [1] Group 1: USDe Overview - USDe is classified as a "synthetic stablecoin," which does not simply hold cash but utilizes a trading strategy to maintain its price near $1 and generate yield for holders [2] - The complexity of USDe's structure, which involves delta hedging on exchanges, contributed to a loss of confidence among traders during the market crash [3] Group 2: Market Reaction - Following the crash, USDe experienced approximately $2 billion redeemed within 24 hours as holders sought to exit, while other synthetic stablecoins like xUSD and deUSD faced outright collapse [3] - During the chaos, USDe briefly traded at around $0.65 on Binance due to a broken price feed and thin liquidity, although it later stabilized near $0.9987 on on-chain DeFi markets [4] Group 3: Broader Market Context - The crash affected not only USDe but also major cryptocurrencies like Ethereum, which experienced significant liquidations, indicating a broader market stress impacting complex DeFi structures [5] - The shift in user preference from synthetic stablecoins to fiat-backed options like USDT and USDC reflects a desire for simpler and more reliable storage of value in the crypto space [6]