The market value of the synthetic “stablecoin” USDe from the Ethena project plummeted by 50% in a month—from $14.8 billion in October to the current $7.2 billion.
Meanwhile, the actual usage of the coin continues to grow, with on-chain transactions reaching $50 billion over the past month. USDe remains among the top three largest stablecoins.
The decline in the coin’s market cap occurred amid a drop in yield to 5.1% annually, compared to double-digit figures at the start of the year.
According to analysts from The Block, the main reason is the closure of leveraged strategies in DeFi protocols like Aave. Their mechanics included:
- repeatedly depositing USDe for staking—sUSDe—as collateral;
- borrowing USDC at maximum LTV ratios;
- converting funds back into sUSDe to repeat the cycle;
- achieving leverage of 10x and more.
The strategy remained profitable as long as USDe’s yield exceeded the cost of borrowing USDC. However, when it fell below 5.4% (the current borrowing rate for Circle’s stablecoin on Aave), there was a mass exit from positions.
The situation is exacerbated by systemic risks in DeFi: several protocols have faced questions about the sustainability of stablecoin farming pools, leading to the closure of such programs.
The dynamics clearly demonstrated the vulnerability of yield-bearing stablecoins to rapid capital outflows—the same mechanisms that drove TVL growth in an uptrend accelerate fund outflows during a correction phase.
Downtrend
The TVL of lending protocols has significantly decreased—from a historic high of $90 billion in October to $63 billion at the time of writing.
Nearly half of the segment is accounted for by Aave—$31.7 billion. At the beginning of last month, the figure was $44.5 billion. The total volume of loans on the platform is estimated at $20 billion, with an average annual yield of about 1.1%.
The top three in terms of total value locked also include Morpho ($5.9 billion) and SparkLend ($4 billion).
The combined volume of loans issued on these platforms is $8.9 billion and $5.7 billion, respectively.
Back in the third quarter, crypto-backed lending reached $73.6 billion, surpassing the previous record from 2021.