Since the market crash on October 10th, the value of Ethena’s synthetic stablecoin, USDe, has dropped by almost 50%. This drop reflects investors’ decreased appetite for leveraged and synthetic collateral schemes.
The synthetic dollar from Ethena Since the massive sale on October 10, USDe has lost over $8.3 billion in net outflows. This is because people no longer trust leveraged and synthetic collateral structures.
The October sell-off marked the end of the bullish phase and the beginning of a period of deleveraging within the cryptocurrency market. The collapse caused the cryptocurrency market to lose nearly $1.3 trillion in value, representing approximately 30% of its total worth at that time.
Experts stated that under these conditions, Ethena USDe USDE$, which employs synthetic collateral and hedging strategies rather than conventional fiat reserves, “lost significant confidence.” CoinMarketCap claimed on October 9 that USDe’s market cap was more than $14.7 billion. In a little over two months, that amount dropped to almost $6.4 billion.
After the crash on October 10, USDe briefly lost its peg and dropped to about $0.65 on Binance. Guy Young, the founder of Ethena Labs, said that the temporary depeg on the exchange was not because of worries about the stablecoin’s collateral, protocol, or redemption mechanics. Instead, it was due to a problem with the exchange’s internal oracle.
Minting and redeeming USDe performed well throughout the market crisis, with almost $2 billion being redeemed in 24 hours on major decentralised finance (DeFi) platforms and only tiny price changes in other areas. CoinMarketCap says that USDe is now worth $0.9987.
The crash in the crypto market on October 10 was the biggest event in the market’s history for selling off assets. CoinGlass data shows that more than $19 billion worth of cryptocurrencies were sold, which caused open interest to decline by $65 billion.
Reduced liquidity and institutional pullback weigh on crypto markets
The market as a whole has also been less active since the crash. Trading volumes for cryptocurrencies are down by about 50%, and US-listed spot Bitcoin exchange-traded funds (ETFs) have lost almost $5 billion since the end of October.
10x Research said that the current downturn has less to do with retail giving up and more to do with regulated capital pulling back on purpose. Bitcoin BTC$87,323 has ceased moving with stocks and gold as liquidity and leverage drop. It now acts more like a risky asset than a macro hedge.