Ethena Labs’ synthetic stablecoin USDe has experienced a significant market capitalization decline, shedding over $5 billion in just three and a half weeks after the October 10 market crash. The event, dubbed “Black Friday,” involved a sudden market correction that affected various leveraged positions across the cryptocurrency ecosystem.
Prior to the flash crash, USDe’s market cap exceeded $14.6 billion. However, between October 10 and 11, the token’s valuation dropped sharply by approximately $2 billion as investors hurried to redeem their USDe tokens and exchange them for the underlying collateral. According to Ethena Labs’ documentation, each redemption results in USDe tokens being burned, which decreases the overall supply and directly impacts market capitalization.
Blockworks analysts highlighted in a governance forum post on October 15 that nearly $1.9 billion in USDe redemptions occurred within a short timeframe surrounding the crash. They noted that the redemption process was handled swiftly, demonstrating the platform’s resilience under significant market strain. Specifically, the analysts pointed out that approximately $1.6 billion of redemptions happened in a single day, with much of the activity concentrated within just a few hours.
Following this initial drop, USDe’s market cap continued to decline, losing an additional $3 billion over the remainder of October. By the time of reporting, Ethena USDe’s market capitalization stood at roughly $9.2 billion, marking a near 40% reduction from its level before October 10.
The market disturbances were compounded by a notable flash crash on Binance, the largest centralized exchange globally. During the incident, USDe’s price on Binance briefly plummeted to approximately $0.65, deviating significantly from its intended $1 peg. This sharp price distortion on Binance led to a cascade of liquidations on the platform and sparked public criticism over the exchange’s pricing and oracle mechanisms.
Contrastingly, on decentralized trading platforms including Curve Finance, USDe largely maintained its peg, indicating the anomaly was isolated to Binance’s ecosystem. In response to critiques, Binance issued a statement on October 12 asserting that their core futures and spot matching engines, along with API trading, remained functional throughout the market turbulence.
Industry observers have also connected USDe’s price decline to issues of excessive leverage. Sam MacPherson, CEO and co-founder of Phoenix Labs, suggested via a social media post that the stablecoin’s over-leveraged supply, estimated at $15 billion, may have contributed to the downturn. He noted that a more sustainable market size for USDe is around $6 to $7 billion, implying that the token’s market cap was likely to contract toward this range following the broader market corrections.
Ethena Labs has not yet provided a formal comment regarding the recent market cap drop and the fallout from the Binance flash crash. Earlier reports from The Defiant noted that USDE deposits on Binance surged to $735 million in late September, spurred by the exchange’s introduction of a 12% annual percentage rate (APR) offer through its Binance Earn program.
The October 10 crash remains one of the largest liquidation events in cryptocurrency history, highlighting ongoing challenges within the synthetic stablecoin sector as well as the vulnerabilities in liquidity and pricing on centralized exchanges.
