Ethena’s USDe Shrinks by $8.3B as Traders Flee Risky Stablecoins

Ethena’s synthetic dollar USDe has shrunk from about $14.7Bn to roughly $6.4Bn in just over two months after the October 10 crypto crash. That’s an $8.3Bn exit as traders unwind risk and move toward simpler, fiat-backed stablecoins. This all happened during the biggest liquidation event in crypto history, when more than $19 billion in positions vanished, and the market wiped out around $1.3Tn in value.

What Is USDe, and Why Did So Much Money Leave?

USDe is a “synthetic stablecoin,” which means it does not simply hold cash in a bank like USDT or USDC. Instead, it employs a trading strategy (delta hedging on exchanges) to maintain its price near $1 and generate yield for holders. Think of it like a dollar that stays at $1 because the issuer runs a complex trading book behind the scenes rather than holding dollars in a vault.

When the October 10 crash hit, that complexity scared people. According to 10x Research via Cointelegraph, the event flipped a bullish, leveraged market into a painful “deleveraging” phase, where traders rushed to cut risk. USDe saw about $2 billion redeemed in 24 hours as holders rushed to exit, while synthetic rivals like xUSD and deUSD collapsed outright, adding more fear to the yield-based stablecoin market.

USDe even briefly traded around $0.65 on Binance during the chaos. StableDash reports that this issue originated from a broken price feed (oracle) and thin liquidity on the exchange, rather than a failure of Ethena’s collateral or redemption system. On-chain DeFi markets, such as Curve and Uniswap, mostly maintained a USDe price near $0.99, and the peg later recovered to approximately $0.9987.

Ethena Labs:https://t.co/aiZp6KIg0I

Chaos:https://t.co/zkzsmkBd1o

LlamaRisk:https://t.co/SAp1TlHb8s pic.twitter.com/03tALw9rpw

— Ethena Labs (@ethena_labs) October 11, 2025

This crash did not happen in isolation. Ethereum and other majors also suffered heavy liquidations, as covered in our piece on the Ethereum crash in October. The same stress that affected leveraged traders also impacted complex DeFi structures that rely on smooth markets and deep liquidity.

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How Does This Stablecoin Shake-Up Affect Regular Crypto Users?

For everyday users, the big story is simple: money moved out of complex stablecoins and into the boring ones. Synthetic stablecoins have lost billions in value, while fiat-backed coins like USDT, USDC, PYUSD, and RLUSD attracted fresh inflows. That tells you where most people feel safer storing their “crypto dollars.”

Why? Because fiat-backed stablecoins are easier to understand. You put in $1, you get 1 token, and the issuer holds cash or short-term bonds. A synthetic stablecoin like USDe introduces additional complexity, including derivatives positions, exchanges, and oracle feeds. In calm markets, that structure can deliver a higher yield. In a violent crash, every extra moving part is one more thing that can break.

We also see a broader pullback in risk appetite. Crypto trading volumes dropped about 50% after the crash, and U.S.-listed spot Bitcoin ETFs bled around $5 billion in outflows. Our coverage of large crypto fund outflows shows the same pattern: regulated and professional money now chooses caution over yield.

For you, this matters any time you park cash in a DeFi app promising attractive stablecoin returns. Those yields typically result from trading strategies or leverage employed in the background. When the market breaks, that “background” risk suddenly moves to the forefront.

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What Risks Should You Watch If You Use Yield Stablecoins Like USDe?

The main risk is not just a token losing its peg forever. It is the path the price can take during a chaotic period. USDe went to $0.65 on one major exchange before recovering. If you used tight stop losses, heavy leverage, or provided liquidity, that brief price glitch could still wreck your position even though the system later stabilized.

There is also “counterparty risk in disguise.” Synthetic models depend on centralized exchanges staying afloat, derivatives markets staying liquid, and oracles reporting correct prices. When multiple synthetic coins blow up around the same time, that correlation tells you they share the same weak spots. Our article on a trader losing $50M in USDT to a wallet scam shows another angle: even stablecoins with good backing cannot protect you from how you use them.

So what can you do in practice? High-yield stablecoins are generally considered speculative trade, not savings vehicles. Users may consider spreading their stablecoin exposure across simpler, fiat-backed coins if they prioritize stability. Position sizes should be carefully managed to avoid outsized losses from exchange glitches, depeg scares, or rapid redemptions. Many experts caution against using high-yield stablecoins for essential funds or short-term money, due to volatility and operational risks.

As the market digests the October shock, we will see whether synthetic stablecoins regain trust or stay niche tools for advanced users chasing yield. For beginners, this phase is an ideal time to slow down, review what you actually hold, and refine your safety habits before the next wave of volatility hits.

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The post Ethena’s USDe Shrinks by $8.3B as Traders Flee Risky Stablecoins appeared first on 99Bitcoins.

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