$2B Ethena USDe Depeg Crisis: Synthetic Dollar System Shows Dangerous Cracks

Crypto's synthetic dollar experiment just hit a $2 billion reality check.

The Great Unpegging

Ethena's USDe stablecoin lost its dollar peg in dramatic fashion—exposing fundamental flaws in the algorithmic stablecoin model that proponents swore was bulletproof. The $2 billion depeg sent shockwaves through DeFi protocols that had built their entire liquidity infrastructure around these synthetic assets.

Structural Weaknesses Exposed

When the mechanism designed to maintain parity fails at scale, everything built on top collapses like a house of cards. The complex web of derivatives and hedging strategies that supposedly backed these synthetic dollars couldn't withstand real market pressure. Turns out, creating money from pure mathematics works great—until it doesn't.

Another 'stable' coin proving that in crypto, the only thing truly stable is the cycle of repeating past mistakes while claiming innovation.

Inside the flash depeg

USDe’s price dislocation came amid one of crypto’s largest liquidation events this year.

Crypto markets experienced a steep sell-off after US President Donald Trump pledged a 100% tariff on Chinese imports, wiping out over $20 billion in digital-asset open interest. The resulting rush into safe havens like gold drained risk appetite and exposed weak points in Leveraged crypto markets.

USDe’s structure depends on the basis trade that involves shorting perpetual futures while holding long spot exposure through reserves in USDT and USDC. When funding rates fall sharply, this mechanism yields lower returns and puts redemption pressure on the system.

Still, the project insists the depeg was localized to Binance and not systemic.

Dragonfly’s Haseeb Qureshi noted that USDe “did not depeg” globally, by pointing out that:

“While USDe wicked down on every CEX, it did not do so uniformly. Bybit briefly hit $0.95 then quickly recovered, yet Binance depegged a crazy amount and took forever to regain the peg. Curve meanwhile dipped a mere 0.3%.”

Moreover, Ethena Labs founder Guy Young confirmed that mint and redemption remained operational throughout, processing $2 billion in redemptions within 24 hours.

He also pointed out that the asset’s primary on-chain liquidity pools, such as Curve, Uniswap, and Fluid, showed fewer deviations, while $9 billion in collateral (mostly USDT and USDC) remained available for instant redemption.

Considering this, Young said:

“I do not think it is accurate to describe this is a USDe depeg when a single venue was out of line with the deepest pools of liquidity that experienced no abnormal price deviations whatsoever.”

Why this matters for Bitcoin

Although USDe is not marketed as a conventional stablecoin, its expanding role in crypto’s financial plumbing means even small pricing errors can have disproportionate effects.

The past weekend’s disruption proved how a venue-specific malfunction can Ripple through markets and cause real losses.

And since USDe is now embedded in several DeFi protocols and centralized exchanges, a short-term gap between its market value and the dollar can spill into other liquidity pools.

Such disruptions can trigger forced liquidations in lending markets, reduce liquidity in BTC and ETH trading pairs, and distort the reference price used across decentralized platforms.

Considering this, OKX founder Star Xu cautioned that the market must recognize what USDe represents, a tokenized hedge fund that is not a “1:1 pegged stablecoin.”

According to him:

“Such funds typically employ relatively low-risk strategies such as delta-neutral basis trading or money-market investments, but they still carry inherent risks — including ADL events, exchange-related incidents, and custodian security breaches.”

Xu noted that platforms using USDe as collateral must apply adaptive risk controls rather than treating it like traditional stablecoins. He argued that ignoring the asset’s structural nuances could introduce systemic exposure to the broader crypto market and turn a localized fault into a sector-wide crisis.