Yield-Bearing Stablecoin USDe Experiences Dollar Peg Loss

Yield-Bearing Stablecoin USDe Struggles Amid Market Volatility

Yield-bearing stablecoin USDe, created by Ethena Labs, experienced a temporary depeg during a recent market rout that triggered an unprecedented wave of liquidations. USDe, known as a synthetic dollar, typically offers holders a 5.5% yield but briefly dropped to 65 cents against the dollar on the Binance exchange.

Market Factors Influencing the Depeg

The value of cryptocurrencies plummeted after US President Donald Trump's announcement of a 100% tariff on China, driving traders toward safe-haven assets such as gold and Treasuries. Over just 24 hours, over $19 billion in bullish crypto bets were liquidated, impacting more than 1.6 million traders, as reported by Coinglass.

Binance confirmed in a blog post its commitment to review the situations surrounding the liquidations tied to USDe, alongside other tokens affected by the market shakeup. With a market valuation of $14 billion, USDe stands as the third-largest digital dollar. Despite the brief depeg, Ethena Labs communicated via a post on X that USDe remains over-collateralized.

Investor Responses and Market Implications

Analyst Rachael Lucas from BTC Markets remarked, “Even a brief stablecoin depeg can shake the market.” She noted the crucial role stablecoins play in providing liquidity and collateral, emphasizing that any loss of confidence could lead to broader crypto volatility. The backing of USDe includes a reserve of digital assets and other stablecoins like USDT and USDC.

Furthermore, the mechanism used by Ethena to generate yield—exploiting price discrepancies in spot and futures markets—can often yield high returns during market booms, yet these strategies face significant testing during downturns. As the current downturn continues, the funding rates for Ethereum have hit their lowest levels since a previous incident in 2024, posing risks to USDe’s yield generation capabilities.

In parallel, Ethena’s governance token, ENA, saw a 43% decline in value over the past day, according to CoinGecko data. Although market trackers identify USDe as a stablecoin, its yield-generating framework marks a significant departure from bigger rivals like USDT and USDC.