Ethena’s USDe Briefly Loses Peg During $19B Crypto Liquidation Cascade

Ethana’s yield-generating stablecoin, USDe, experienced a temporary loss of its 1:1 dollar peg amid a significant market downturn triggered by former U.S. President Donald Trump’s announcement regarding a 100% additional tariff on China.

On the Binance exchange, USDe plummeted to 65 cents before quickly regaining its dollar parity during what is recognized as crypto’s largest liquidation event to date in terms of U.S. dollar value. Over $19 billion in liquidations transpired within just 24 hours.

Currently, USDe offers a yield of 5.5% to its holders and is supported by a combination of cryptocurrencies, employing a basis trade strategy designed to capitalize on price discrepancies between spot and futures markets.

Trump’s unexpected announcement prompted investors to seek refuge in safe assets such as gold and U.S. Treasuries.

The drop in USDe had substantial effects, as noted by crypto trader and economist Alex Krüger, who stated that lesser-traded tokens on centralized exchanges “didn’t falter as much,” with many quickly recovering from the dip.

This situation arose as exchanges like Binance and Bybit valued prices in closer alignment with real-time trading, while lending protocols like Aave had USDe hardcoded at $1, which helped insulate them from some immediate repercussions of the brief dip.

Ethena Labs communicated via social media that USDe remains over-collateralized and that widespread liquidations impacted USDe’s secondary market pricing.

“We can confirm that minting & redeeming functionalities have remained operational throughout, with no downtime experienced, and USDe continues to be overcollateralised,” Ethena Labs stated in their post.

“Due to liquidations, perpetual contracts have been continuing to trade below the spot price. This results in additional unforeseen unrealized profit and loss (uPNL) within USDe, as Ethena maintains a short position on these contracts, which is currently being realized for the benefit of the protocol,” the project elaborated.

Binance announced it is reviewing affected accounts and liquidations, alongside considering “appropriate compensation measures.”

Ethena’s governance token, ENA, experienced a decline of as much as 40% during the downturn before beginning to recover. It has seen a nearly 25% decrease in the last 24 hours.