- A major crypto crash on Friday erased about $500 billion from the total market cap and led to over $19 billion in liquidations.
- During the turmoil, Ethena’s USDe stablecoin briefly dropped to $0.65 on Binance, raising concerns about its stability.
- Binance attributed the USDe price drop to its internal spot price data system, and reimbursed nearly $283 million to users affected by liquidations.
- Ethena reported its USDe remained overcollateralized and its underlying positions made gains during the crash, helping restore stability.
- On-chain platforms like Aave suffered fewer impacts due to different pricing mechanisms, but Venus Protocol on BNB Chain experienced liquidations and pledged user compensation.
On Friday, the global cryptocurrency market suffered a dramatic decline, wiping out around $500 billion from its overall value. The sharp drop in prices caused traders using leverage to see more than $19 billion in positions liquidated.
Amid the volatility, Ethena’s synthetic stablecoin, USDe, sharply dropped from its intended $1 peg to as low as $0.65 on Binance. According to Binance’s official statement, the rapid decline was linked to its use of internal spot price data as an oracle for determining asset values, causing a cycle where USDe-backed positions were liquidated and further selling drove the price down. Binance confirmed it reimbursed about $283 million to users who were liquidated because they held these affected assets as collateral.
Ethena published a proof of reserves update following the incident, stating that USDe remained overcollateralized throughout the crash. The company claimed its underlying trading strategies actually generated profits during the market disturbance, providing further security for its stablecoin.
Other major stablecoins like Tether (USDT) and Circle (USDC) are backed 1:1 with assets like cash and U.S. Treasury bonds. In contrast, USDe relies on delta-neutral positions, which try to minimize market risk by balancing gains and losses. According to Ethena, the depeg only occurred on Binance, while price changes on on-chain liquidity pools stayed mostly in line with other stablecoins such as USDC, showing much less volatility.
Different lending and trading platforms responded in various ways. The large on-chain lender Aave uses a hard-coded oracle that pegs USDe directly to USDT, which helped prevent major liquidations during this event. However, the depegging of another asset, WBETH, did cause some liquidations on BNB Chain’s Venus Protocol. Venus announced it would compensate users who lost funds in a 40-minute window after the disruption.
The sudden drop in crypto prices was triggered after renewed threats of tariffs against China surfaced, causing market-wide uncertainty. Binance indicated that “long-standing limit orders,” which were executed in a thin market with few buyers, worsened the price drops.
For further specifics, see CoinMarketCap charts, Coinglass liquidation data, Ethena’s proof of reserves update, and Binance’s official statement.
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