The USDe Crash: Ethena’s Algorithmic Stablecoin Tested by Market Pressure
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Ethena’s algorithmic stablecoin USDe faced intense market pressure during yesterday’s crypto sell-off, plunging to around $0.65 on Binance before partially stabilizing.
The sharp drop sparked widespread concern among traders, prompting the project’s developers to issue an urgent proof-of-reserves update.
Ethena Labs, which usually discloses reserve data weekly through auditors like Chaos Labs, Chainlink, Llama Risk, and Harris & Trotter, accelerated its reporting schedule in response to community demand.
The company stated that USDe remains overcollateralized, with roughly $66 million in excess backing, emphasizing that this transparency reaffirms its solvency and reliability.
The crash also revived debate about whether USDe truly qualifies as a “stablecoin.” Conflux co-founder described it instead as a tokenized fund share linked to a $1 net asset value, arguing that its stability depends on a valuation mechanism rather than traditional reserves.
Formula News founder Vida added that forced liquidations among arbitrage traders may have amplified the volatility, depleting collateral and triggering cascading liquidations across the market.
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