$700 Million Exit From Ethena’s USDe Sparks Panic After xUSD and deUSD Collapse

By the way, according to the data of @tomwanhh and Wu Blockchain, Ethena’s stablecoin, USDe, a yield-bearing stablecoin, has been redeemed for over $700 million in just 7 days. After the failure of xUSD and deUSD injected concern on the safety of yield-based stablecoins, the redemption wave began. This massive selloff accounts for about 10-15% of USDe’s circulating market cap, signaling a rapid loss of investor confidence in a once high-growth project.

Trading Value of $5.4 B Wiped Out Since October 11

Ethena’s USDe has seen its market capitalization drop by more than $5.4 billion since October 11, 2025. The coin lost an estimated $7 billion in market cap to drop to $1.6- $2 billion. The drop reflects a major loss of investor confidence and liquidity in the decentralized finance (DeFi) markets. History has shown that stablecoins with sophisticated yield mechanics, such as delta-hedging and staked Ethereum collateral, are likely to spiral rapidly once redemption requests are made.

The collapse of xUSD and deUSD had a direct effect on the market stability of USDe. xUSD, issued by Stream Finance, lost its $1 peg due to the halt in redemptions, while deUSD, which is pegged to xUSD, collapsed as a result of the direct interdependence of their liquidities. These collapses eroded the trust of DeFi investors, leading to massive withdrawals from other yield stablecoins. Analysts suggest structural weaknesses and poor liquidity management as the main reasons for the contagion to spread to Ethena.

Yield Model and Delta Hedging Put to the Test

Ethereum Derivatives Ethena’s USDe is backed by ethereum delta-hedging, which means Ethena’s USDe is a derivative that is used to hedge staked Ethereum. In times of volatile markets this model can fall apart if the liquidity becomes unobtainable or the collateral values start decreasing drastically. According to the market observers, redemption pressures have been compounded by the recent turmoil in the Ethereum price. Algorithmic stablecoins have seen stablecoin collapses before (like TerraUSD in 2022), and it is now under scrutiny as to whether its model is actually sustainable in the long term for USDe.

Market and Regulatory Implications.

A market-wide fear of yield-bearing stablecoins accounts for the $700 million withdrawal. Platforms which have accepted USDe as collateral are likely to be under liquidity stress. As pointed out in the disclaimer of Wu Blockchain’s article, the regulation on virtual currencies in China adds one more layer of uncertainty. There is a likely increased scrutiny of the high yield stablecoin models, which, in the near term at least, could further restrict recovery potential.