The synthetic stablecoin Ethena USDe lost more than $5 billion in capitalization in less than a month after a major market crash known as ‘Black Friday.’
After the Crash — Billions Lost
Before the events of October 10, USDe’s capitalization exceeded $14.6 billion. However, after the market crash, during which over $19 billion in margin positions were liquidated, investors began massively redeeming USDe and withdrawing collateral.
According to Ethena Labs, each token redemption operation is accompanied by burning an equivalent amount of USDe, which directly reduces the supply and, consequently, the total market capitalization.
According to Blockworks analysts, between October 10 and 11, users withdrew about $1.9 billion, with most transactions processed within just a few hours.
‘The volume of redemptions reached $1.6 billion in one day and $1.9 billion in two days, but the system showed high resilience,’ analysts noted in a report for the Ethena Governance Forum.
After this, the token continued to lose capitalization — another $3 billion during October, dropping to $9.2 billion by the end of the month.
Exchange Crash on Binance
The nearly 40% drop became the largest in USDe’s history since its launch at the end of 2023. One of the triggers for the mass redemptions was a sudden price collapse of the token on Binance — the largest centralized crypto exchange.
On October 10, the USDe price on Binance briefly fell to $0.65, although on other platforms, including Curve Finance, the stablecoin maintained its $1 peg.
The incident sparked a wave of criticism toward Binance: users accused the exchange of improper price oracle operation, which triggered a chain reaction of liquidations.
In response, Binance released a statement on October 12, emphasizing that the main trading engines and exchange APIs were operating normally, and the issues were due to market volatility, not internal errors.
Overheating Effect and the ‘Natural Size’ of the Market
Phoenix Labs head Sam MacPherson commented on November 2 that part of USDe’s losses can be explained by excessive supply growth.
‘When the token volume reached $15 billion, it became overvalued. The organic scale for USDe is about $6–7 billion, so when the market reversed, it was logical for the capitalization to fall to a natural level,’ MacPherson wrote.
Thus, the sharp market contraction can be seen as a natural correction after a phase of hypergrowth driven by high demand and aggressive yield products.
Deposits and Yield
At the end of September, Binance saw a surge in USDe deposits — in just one day, the placement volume exceeded $735 million after the launch of the Binance Earn program with a 12% annual yield. This inflow was a record for the stablecoin and, according to analysts, created an imbalance between real and borrowed demand.
Ethena Labs has not yet commented on the drop in capitalization. However, market participants believe that the project passed a stress test, demonstrating a high speed of token redemption and the ability to withstand sharp fluctuations in demand.
See also: Wintermute CEO denied rumors of a lawsuit against Binance after ‘Black Friday’
What’s Next?
Despite losing $5 billion in capitalization, analysts note that the USDe redemption and burning mechanism worked correctly. The reduction in circulation volume helped the system maintain stability, and the stablecoin kept its dollar peg on most DeFi platforms.
Currently, the Ethena market is returning to more ‘organic’ scales, and investor interest is gradually shifting from high yields to reliability and liquidity.
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