(Bloomberg) — Crypto project Ethena’s yield-bearing stablecoin briefly lost its dollar peg during a market rout that triggered record liquidations.
USDe, which is marketed as a “synthetic dollar” and currently offers holders a 5.5% yield, fell to 65 cents against the dollar on Binance. The token is designed to maintain a price close to that of the US dollar, which it regained shortly after the initial selloff.
Cryptocurrencies tumbled after US President Donald Trump said he would impose an additional 100% tariff on China, sparking a rush for safe haven assets including gold and Treasuries. Over the past 24 hours, more than $19 billion of bullish crypto bets have been wiped out, with more than 1.6 million traders liquidated, according to Coinglass data.
“Our team is currently conducting a thorough review of the impacted users, the details surrounding these liquidations, and the appropriate compensation measures,” Binance said in a blog post about USDe and two other tokens that lost their pegs.
Ethena Labs didn’t immediately respond to request for comments.
USDe boasts a market value of $14 billion, making it the third-largest digital dollar. Its price gyrations, however brief, were enough to spark concerns among investors. Ethena Labs said in a post on X that the token remains over-collateralized.
“Even a brief stablecoin depeg can shake the market,” said Rachael Lucas, analyst at BTC Markets. “Traders rely on them for liquidity, lending, and collateral, so any loss of confidence can trigger liquidations and spill into wider crypto volatility.”
The USDe token is backed by a reserve of digital assets, including stablecoins like USDT and USDC. Ethena uses a version of the basis trade for its stablecoin, which exploits price discrepancies in spot and futures markets, to generate yield.
When crypto markets are booming and funding rates — the interest paid by bullish traders to take on leverage for futures bets — are high, the mechanism Ethena relies on can translate into sky-high yields. But that gets tested during massive selloffs.
In the present downturn, the hourly funding rate for Ether fell to its lowest level since at least the unwinding of the yen-carry trade in Aug. 2024, a slide that threatens to squeeze returns on USDe.
Ethena’s governance token, ENA, also fell as much as 43% in the past 24 hours, according to CoinGecko data.
USDe’s yield generating structure is a key differentiator from rivals USDT and USDC, the world’s biggest stablecoins, which are mainly backed by highly liquid assets like US Treasury bills. Crypto data trackers CoinGecko and CoinMarketCap nevertheless classify USDe as a stablecoin.
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