Analysts consider that even a short depegging of stablecoins may shock the market. Merchants depend on them for liquidity, lending, and collateral, and any lack of confidence could set off liquidations and unfold to broader cryptocurrency volatility.
Ethena, a cryptocurrency challenge, noticed its yield-bearing stablecoin USDe briefly lose its peg to the US greenback throughout a significant market downturn, highlighting the vulnerability of latest stablecoin mechanisms underneath excessive market circumstances.
On Friday, USDe briefly fell to 65 cents on the Binance alternate earlier than shortly recovering to near-dollar ranges. The token, known as a “artificial greenback,” at the moment affords holders a 5.5% yield and has a market capitalization of $14 billion, making it the third-largest stablecoin globally.
The market crash was triggered by Trump’s tariff threats, prompting traders to flock to safe-haven property corresponding to gold and US Treasuries. In accordance with Coinglass information, bullish cryptocurrency positions price over $19 billion have been liquidated in the previous 24 hours, affecting greater than 1.6 million merchants who have been pressured to shut their positions.
Binance acknowledged that it’s conducting a complete assessment of affected customers, liquidation particulars, and applicable compensation measures. Ethena Labs responded on social media, stating that the token stays over-collateralized.
Depegging incident shakes market confidence
Though the worth fluctuation of USDe was short-lived, it was sufficient to lift investor issues. Rachael Lucas, an analyst at BTC Markets, commented:
Even a brief depegging of a stablecoin can shake market confidence. Merchants depend on them for liquidity, lending, and collateral; thus, any lack of confidence could set off liquidations and unfold to broader cryptocurrency volatility.
In a weblog put up, Binance talked about that two different tokens additionally misplaced their pegs. The alternate acknowledged it’s completely reviewing affected customers and growing corresponding compensation measures.
ENA, the governance token of Ethena Labs, additionally suffered a big impression, with a drop of as much as 43% in the previous 24 hours, in response to CoinGecko information.
Distinctive income mechanism faces stress check
USDe adopts a foundation buying and selling technique to generate returns by leveraging worth variations between the spot and futures markets. The token is backed by digital asset reserves, together with stablecoins corresponding to USDT and USDC.
When the cryptocurrency market thrives and funding charges are excessive, the mechanism Ethena depends on can produce extraordinarily excessive returns. Funding charges consult with the curiosity paid by bullish merchants for leveraged futures positions. Nonetheless, throughout large-scale sell-offs, this mechanism faces extreme challenges.
In the present market downturn, Ethereum’s hourly funding fee has dropped to its lowest degree since a minimum of August 2024, when yen carry trades have been unwound. This decline threatens the return fee of USDe.
The construction of USDe’s income era serves as a key differentiator from its rivals, USDT and USDC. The latter two, the largest stablecoins globally, are primarily supported by extremely liquid property corresponding to U.S. Treasury bonds.
Regardless of structural variations, cryptocurrency information monitoring platforms CoinGecko and CoinMarketCap nonetheless classify USDe as a stablecoin. This classification displays the market’s acceptance of latest stablecoin mechanisms but in addition highlights the challenges of sustaining stability underneath excessive market circumstances.
