⚠️ATTENTION⚠️
IS #BITCOIN FALLING DUE TO A NEW CRISIS IN #DEFI?
💥Stream Finance has just COLLAPSED, leaving a hole of $530M and reviving fears of contagion in the ecosystem. 👇
WHAT HAPPENED⁉️
▪️Stream Finance, creator of the stablecoin xUSD, reported a loss of $93M following a collapse in its “recursive looping” scheme.
▪️“Recursive looping” refers to a practice where a protocol uses assets generated by itself or by another protocol as collateral
▪️The mechanism allowed minting xUSD with loans from Elixir (deUSD) and using it again as collateral to create more xUSD.
▪️Result: $530M in inflated assets, backed by only $162M real.
👉A mirage of liquidity... The fall was immediate, xUSD plummeted by -76%
IS THE PROBLEM MUCH BIGGER⁉️
▪️The direct damage is $93M, but there is $285M of toxic debt spread across protocols like Euler ($90M), Silo ($28M), and Morpho ($68M).
▪️Withdrawals were frozen and the firm Perkins Coie LLP leads the investigation.
▪️Analysts revealed a circular scheme between xUSD and deUSD (from Elixir)
▪️Both backed each other… creating hidden leverage
-SIGNS OF IRREGULARITIES BEFORE THE COLLAPSE
▪️The xUSD vault went from $40M to $400M in months… maintaining a “flat yield” of 15%
▪️This would be impossible without leverage or external intervention
▪️Four days before the collapse, Stream announced audits and transparency dashboards
👉They promised institutional reserves... and delivered another failed experiment
WHAT DOES THIS TEACH US⁉️
▪️DeFi still hasn’t solved its Achilles' heel: uncontrolled leverage and lack of real audit.
▪️Many protocols chase TVL at any cost, inflating figures with circular loops.
WHY DOES IT MATTER FOR #BITCOIN⁉️
▪️Each collapse in DeFi generates forced sales of collateral, putting pressure on BTC and ETH.
▪️And, above all, it erodes confidence in the entire #crypto market
📍The lesson remains the same: if you don’t know where the yield is coming from… be careful$BTC
