Ethena's synthetic dollar USDe has lost about $8.3 billion in net outflows since the main liquidation on October 10 as confidence in leveraged and artificial collateral structures continues to weaken.
According to a report by 10x Research, October's selloff marked a turning point for the crypto market, turning the bull phase into certainly one of deleveraging. The crash worn out an estimated $1.3 trillion in crypto market value, nearly 30% of the full capitalization on the time.
Ethena USDe (USDe), which relies on synthetic collateral and hedging mechanisms quite than traditional fiat reserves, faces a “severe lack of confidence” under these conditions, the analysts wrote.
According to data from CoinMarketCap, USDe’s market cap was nearly $14.7 billion as of October ninth. In just over two months, that value fell to around $6.4 billion.
USDe market cap is falling. Source: CoinMarketCap.
USDe short term price depeg error
After the October 10 crash, USDe temporarily lost its peg and fell to around $0.65 on Binance. Guy Young, founding father of Ethena Labs, said the transient drop in exchange pegs was attributable to an internal Oracle issue on the exchange and never any issues with the stablecoin's collateral, protocol or redemption mechanisms.
He said USDe minting and redemption operated normally through the market crash, with about $2 billion redeemed in 24 hours across major decentralized finance (DeFi) venues and only minor price deviations elsewhere. According to data from CoinMarketCap, USDe is trading at $0.9987 on the time of writing.
The crypto market crash on October tenth was the most important liquidation event within the history of the crypto market. According to data from CoinGlass, greater than $19 billion price of cryptocurrency positions were liquidated, leading to a $65 billion drop in open interest.
Crypto market activity is stagnating
Since the crash, general market activity has also slowed. Crypto trading volumes have fallen by about 50%, while U.S.-listed spot Bitcoin exchange-traded funds (ETFs) have seen net outflows of around $5 billion for the reason that end of October.
10x Research said the present weakness was less attributable to retail capitulation and more to a deliberate withdrawal of regulated capital. As leverage and liquidity decline, Bitcoin (BTC) has decoupled from each stocks and gold, trading more like an isolated risk asset than a macro hedge.
