<\/p>\n
The synthetic stablecoin\u2019s market capitalization has shed over $5 billion in just three and a half weeks.<\/p>\n
Ethena Labs\u2019 synthetic dollar-pegged token Ethena USDe (USDE<\/a>) has lost over $5 billion of its market capitalization since the Oct. 10 market crash, after the asset experienced a major stress test. <\/p>\n Before the \u201cBlack Friday\u201d flash crash \u2014 which wiped out over $19 billion in leveraged positions across the market, becoming the largest liquidation event<\/a> in crypto to date \u2014 USDE\u2019s market cap stood above $14.6 billion.<\/p>\n Ethen USDe’s market cap fell sharply by about $2 billion on Oct. 10-11 as investors rushed to redeem their USDE, exchanging their tokens for the underlying collateral. According to Ethena Labs\u2019 documentation<\/a>, each USDE redemption burns the returned USDE, which can reduce the overall token supply, and thus the market capitalization.<\/p>\n As Blockworks analysts noted<\/a> in an Oct. 15 Ethena governance forum post, \u201capproximately $1.9 billion in USDe redemptions were processed between the 10th and the 11th of October.\u201d The analysts added that the large redemption volume was processed quickly, noting Ethena\u2019s mechanism showed \u201cextreme resilience\u201d:<\/p>\n \u201cWhile it [redemption volume] was for $1.6B in a single day and $1.9B in the two days before and after the crash, it is likely realistic to consider that the bulk of this redemption happened in less than a few hours.\u201d<\/p><\/blockquote>\n<\/figure>\n Ethena USDe lost another $3 billion in market cap over the rest of October, reaching about $9.2 billion at press time.<\/p>\n The nearly 40% drop in market cap is the sharpest one since Ethena USDe\u2019s launch in late 2023. While it\u2019s hard to say what the exact reasons for the massive redemptions are, the token did come under increased scrutiny after Oct. 10, when its price on crypto’s largest centralized exchange (CEX) Binance<\/a> briefly plunged to about $0.65.<\/p>\n As The Defiant reported<\/a> earlier, USDE’s dramatic price crash below $1 on Binance \u2014 which didn\u2019t occur on other platforms \u2014 led to a wave of liquidations on the CEX, resulting in widespread criticism<\/a> of Binance\u2019s pricing oracle setup. Notably, on Curve Finance<\/a> and other decentralized protocols, USDE\u2019s price stayed close to its $1 peg during the market volatility.<\/p>\n In a blog post on Oct. 12, Binance distanced<\/a> itself from those accusations, saying instead that the exchange\u2019s core futures and spot matching engines and API trading \u201cremained operational\u201d during the crash.<\/p>\n Sam MacPherson, CEO and co-founder of Phoenix Labs, suggested in an X post<\/a> on Nov. 2 that part of USDe\u2019s decline could also be linked to excessive leverage, noting that the token had become \u201cover-leveraged at 15 billion.\u201d<\/p>\n \u201cAs I said the more organic size for USDe is around 6-7b and so when the market turns it was always going to reflexively drop to the organic size,” MacPherson wrote.<\/p>\n The Defiant reached out to Ethena Labs for comment on the shift, but hasn\u2019t heard back by press time.<\/p>\nThe Binance Flash-Crash <\/h2>\n