Ethena USDe Shrinks Over 13% After 100% Tariff Shock Flips Yield Spread Negative
Updated
Updated · Liberty Street Economics - · Jun 23
Ethena USDe Shrinks Over 13% After 100% Tariff Shock Flips Yield Spread Negative
1 articles · Updated · Liberty Street Economics - · Jun 23
Summary
USDe’s market capitalization fell more than 13% after Oct. 10, 2025, when its yield spread versus ether staking turned negative and investors rushed to redeem the synthetic stablecoin.
A potential additional 100% U.S. tariff on Chinese goods triggered a broad risk-off selloff, slamming crypto prices, draining exchange liquidity and reversing funding rates in ether perpetual futures.
Ethena’s structure pairs long staked ether with short perpetual futures; once shorts had to pay more than staking earned, redemptions forced the protocol to buy back futures and sell ether collateral.
Binance-listed USDe briefly dropped to $0.65 as thin trading and an exchange-specific price oracle amplified the stress, even as asset-backed stablecoins USDC and USDT largely held their dollar pegs.
The New York Fed post says the episode shows how synthetic stablecoins can transmit funding shocks into spot crypto markets and, as crypto-traditional finance links deepen, potentially beyond them.
The USDe crisis revealed DeFi's hidden fragilities. What is the next 'stable' market assumption that could suddenly break?
The GENIUS Act targeted payment stablecoins. Did it inadvertently push risk into unregulated DeFi instruments like USDe?
Ethena redesigned USDe's backing after its near-collapse. Is its new model safer or just hiding the next systemic risk?
Unraveling USDe: The 60% Drop During the October 2025 Crypto Crash and Its Impact on Stablecoin Risk
Overview
In October 2025, the crypto market faced a sudden and severe shock that triggered a rapid price collapse and a widespread deleveraging event. This downturn sharply contrasted with other risk assets and exposed unique vulnerabilities in the crypto ecosystem. Stablecoin protocols like Ethena’s USDe were hit especially hard, as the crisis revealed the risks of synthetic stablecoins that rely on complex derivatives strategies. The event highlighted how quickly market euphoria can reverse, leading to significant losses and operational failures across both centralized and decentralized platforms, and underscored the need for stronger risk management and transparency in digital asset markets.