Ethana’s stablecoin USDe briefly lost its 1:1 peg to the dollar during the recent sharp market sell-off sparked by US President Donald Trump’s announcement of an additional 100% tariff on China.
On Binance, USDe fell to 65 cents before quickly regaining parity with the dollar during what is considered the largest liquidation event in the history of cryptocurrencies in US dollar value. More than $19 billion in liquidations occurred in just 24 hours.
USDe, which currently offers a 5.5% yield to its holders, is backed by a mix of cryptocurrencies and uses a basic trading strategy, a financial setup that aims to profit from price differences between the spot and futures markets.
Trump’s shocking announcement sent investors fleeing to safe havens such as gold and US Treasuries.
The USDe drop had outsized effects, according to economist and cryptocurrency trader Alex Krüger, as tokens that are not traded as actively on centralized exchanges “didn’t suffer as much” and some quickly recovered from the drop.
This is because exchanges like Binance and Bybit marked the price closer to real-time trading, while lending protocols like Aave hardcoded it into USDe at $1, shielding them from some of the immediate impact of the brief depew.
Ethena Labs said in a social media post that USDe remains overcollateralized and that widespread liquidations affected the price of USDe in the secondary market.
“We can confirm that the minting and redeeming functionality has remained operational throughout without experiencing downtime, and USDe remains overcollateralized,” Ethena Labs wrote in the post.
“Due to sell-offs, perpetual contracts have been trading and remain below the spot price. This creates unexpected additional uPNL within USDe, due to Ethena being short these contracts, which is currently in the process of being realized for the benefit of the protocol,” the project added.
Binance has said it is reviewing the affected accounts and settlements, along with “appropriate compensation measures.”
Ethena’s governance token, ENA, fell as much as 40% during the crash before starting to recover. It is down almost 25% in the last 24 hour period.
