The fluctuations in the cryptocurrency market on October 11, 2025, marked by USDe significantly decoupling and nearly $19 billion in cascading liquidations, became a crucial stress test in the development history of synthetic stablecoins. This crisis not only exposed systemic risks arising from high leverage, weak risk control, and infrastructure flaws but also prompted the industry to shift from 'yield-first' to 'safety-first.' Compliance stablecoins, represented by USD1, actively reduced leverage and restructured their reserves and risk control systems, defining new development boundaries for the stablecoin sector.
1. USDe Decoupling: A Perfect Storm Driven by High Leverage
As a synthetic stablecoin issued by Ethena Labs, USDe relies on derivatives hedging and funding rate yield design, once ranking among the mainstream stablecoins globally due to high annual yields. However, under extreme market conditions, its mechanism weaknesses and market abuse behaviors concentratedly erupted, ultimately triggering a price crash.
(1) Core context of the decoupling event.
External macro shocks and market volatility became the triggering factors, with the overall decline of crypto assets leading to a rapid reversal of funding rates. Coupled with abnormal oracle behavior from leading exchanges and liquidity fractures, market confidence collapsed quickly. In the secondary market, USDe’s quote on centralized platforms once dropped to 0.65 USD, while on-chain DEXs remained relatively stable due to arbitrage mechanisms, yet the overall market selling pressure was difficult to contain. With the initiation of the liquidation chain, contract positions using USDe as collateral were forcibly liquidated in batches, forcing users to sell assets to cover margins, creating a 'price drop - intensified liquidation - further selling pressure' death spiral, ultimately leading to systemic shocks across the entire market.
(2) Deconstructing the core causes of the decoupling.
1. The deadly abuse of high-leverage cycles.
The prevalent circular lending strategies within the USDe system have become amplifiers of risk: users collateralize USDe to borrow other stablecoins, then mint new USDe, repeating the process to push leverage multiples to 2-5 times, with approximately 60% of the protocol's liabilities built on high leverage. This hidden leverage amplifies profits in bull markets but multiplies losses in bear markets. After the value of collateral shrinks, smart contracts trigger automatic liquidations, causing a chain reaction that directly breaches the price floor of the stablecoin.
2. The dual defects of hedging mechanisms and infrastructure.
The price stability of USDe highly depends on the liquidity of derivatives on centralized exchanges and hedging positions, with about 70% of short positions concentrated on a few platforms. If there are system delays, contract suspensions, or oracle failures at the exchange, the hedging structure becomes instantly ineffective. Some platforms use internal order books for pricing rather than multi-source aggregated data, further distorting prices and triggering erroneous liquidations, amplifying market volatility.
3. Misalignment of risk recognition driven by yield.
Protocols and platforms, in pursuit of TVL growth, package high-risk DeFi yields as 'low-risk savings products', misleading investors to overlook underlying leverage risks. When high-yield promises can no longer be sustained, the combination of fund withdrawals and redemption waves further consumes protocol liquidity, weakening the credit support of stablecoins.
(3) Core lessons from the incident.
The core value of stablecoins lies in price stability and credit reliability, not high-yield speculative tools. First, unlimited leverage equates to unlimited risk; circular and hidden leverage can break all risk control assumptions under extreme market conditions, necessitating the establishment of penetrative leverage monitoring and limit management. Second, over-reliance on centralized infrastructure poses systemic blind spots; single point failures in oracles, liquidation engines, and liquidity channels can trigger full-chain risk transmission. Third, the transparency of reserves and hedging mechanisms determines the confidence baseline; stablecoins lacking real-time audits and concentrated assets struggle to withstand redemption pressures in panic markets. Lastly, compliance and regulatory adaptation form a long-term moat; the wild growth outside regulatory frameworks ultimately incurs heavy costs during risk outbreaks.
II. Deleveraging of USD1: A new paradigm of risk control iterated from crisis.
After the USDe decoupling event, compliant stablecoins represented by USD1 rapidly adjusted their strategies, focusing on proactive deleveraging, solidifying reserves, and strengthening risk control, thereby reconstructing the operational logic of stablecoins and becoming a typical example of the industry's shift.
(1) The underlying design of USD1 and the core logic of deleveraging.
USD1 adopts a 1:1 fiat asset reserve model, with the underlying assets mainly consisting of high liquidity, low-risk assets such as U.S. short-term Treasury bonds and dollar deposits, managed by licensed trust institutions, fundamentally avoiding the hedging risks and leverage nesting of synthetic stablecoins. Its deleveraging is not merely a single parameter adjustment but a systematic risk control upgrade covering the entire process of issuance, circulation, and liquidation, with the core goal of compressing speculative leverage space and anchoring the basic functions of stablecoins in payment, settlement, and value preservation.
(2) Specific implementation paths for deleveraging.
1. Strictly limit leverage nesting and circular lending.
Completely prohibit circular minting and circular lending operations based on USD1, cutting off the channels for self-amplifying leverage. The protocol sets hard constraints on the position limits and collateralization rates for single addresses, controlling the overall leverage multiple within a low-risk range, eliminating speculative application scenarios of leverage above 2 times, and removing the trigger conditions for death spirals at the regulatory level.
2. Gradient margin and liquidation rule optimization.
For the lending and contract scenarios using USD1 as collateral, a layered maintenance margin rate mechanism is implemented, dynamically adjusting margin requirements based on asset liquidity and market volatility to reduce the probability of forced liquidation caused by minor price fluctuations. At the same time, the clearing process is optimized by adopting batch liquidation and liquidity protection mechanisms to avoid concentrated sell-offs that exacerbate market volatility, thereby ensuring the stability of stablecoin prices.
3. Low-risk and high-liquidity allocation of reserve assets.
Adhere to the principles of sufficient reserves and transparent audits, with over 90% of reserve assets allocated to short-term U.S. Treasury bonds, demand deposits, and other low credit risk, high liquidity assets, while abandoning high-yield non-standard assets to exchange returns for enhanced stability. Publish third-party reserve proofs daily and accept both on-chain and off-chain dual audits to rebuild market confidence through transparency.
4. Strengthening infrastructure and compliance systems.
Adopt a multi-source decentralized oracle combination for pricing, replacing single centralized platform pricing to avoid price distortion risks; adapt to global mainstream regulatory frameworks such as the EU MiCA and U.S. stablecoin regulatory drafts, establishing anti-money laundering and user due diligence systems to reduce policy and compliance risks. Simultaneously, diversify liquidity access channels to reduce reliance on a single trading platform and enhance resilience under extreme market conditions.
(3) Market value and industry insights brought by deleveraging.
The proactive deleveraging of USD1 sacrificed some short-term return attractiveness but resulted in three significant enhancements: price stability, credit reliability, and long-term sustainability. During subsequent market fluctuations, USD1 maintained a pegged price of 1 USD without large-scale liquidations or decoupling risks, validating the effectiveness of the low-leverage, strong reserve model. This paradigm also sends a clear signal to the industry: the competitive core of stablecoins has shifted from 'high yield' to 'high safety', and deleveraging, strong risk control, and compliance will become mainstream choices in the sector.
III. The future direction of the stablecoin sector: from wild growth to prudent development.
The decoupling of USDe and the deleveraging of USD1 together outline the transformation curve of the stablecoin sector: the model of high leverage, weak regulation, and black-box operations gradually retreats, while the paradigm of low leverage, strong compliance, and transparency becomes mainstream.
For issuers, it is necessary to return to the essence of stablecoins, placing price stability and risk control above returns, establishing a comprehensive risk control system that includes leverage limits, reserve management, and emergency redemption, embracing regulatory standards, and improving reserve transparency and infrastructure redundancy. For investors, it is essential to abandon the speculative illusion of 'low risk, high yield' and prioritize compliant stablecoins with sufficient reserves, transparent audits, and limited leverage, avoiding high-risk behaviors such as circular lending and high-leverage collateral. For regulators and the industry ecosystem, it is necessary to accelerate the unification of stablecoin regulatory standards, standardize leverage applications, liquidation mechanisms, oracle integration, and other core processes, and establish a cross-platform, cross-protocol risk monitoring and emergency coordination mechanism to prevent systemic risk spillover.
IV. Conclusion.
The decoupling of USDe serves as a lesson worth billions of dollars in risk; it bursts the bubble of high-yield, low-risk synthetic stablecoins and confirms the underlying principle in financial markets that 'risk and return are equivalent'. When small investors exploit USD1’s advantages, they must be cautious about the decoupling of USD1.
