Ethena's Stablecoin USDe Plunges by Half Following October Crypto Market Crash

RBK-cryptoPublished on 2025-12-24Last updated on 2025-12-24

Abstract

The stablecoin USDe, issued by Ethena, experienced a significant decline, with its market capitalization plummeting by more than half from its October peak, dropping by $8.5 billion. This sharp decrease followed the major cryptocurrency market crash on October 10, which triggered record trader liquidations nearing $20 billion in nominal futures positions. Analysts from 10x Research noted that the crash eroded investor confidence in USDe's synthetic backing mechanism during periods of market stress. USDe, the fourth-largest stablecoin by market cap, is not directly backed by the US dollar but instead relies on a delta-neutral strategy involving positions like simultaneous long and short trades on assets such as Bitcoin. Despite being one of the sector's most profitable protocols with nearly $400 million in earnings since the beginning of the year, USDe's supply fell from a peak of $14.8 billion in early October to $6.3 billion by December 24. Ethena's native token, ENA, also suffered, declining 60% since October and nearly 80% year-to-date. In contrast, other major stablecoins in the top five saw growth or only minor, temporary declines during the same period.

"RBC-Crypto" does not provide investment advice; the material is published for informational purposes only. Cryptocurrency is a volatile asset that may lead to financial losses.

From its peak in early October, the market capitalization of one of the largest stablecoins, USDe by issuer Ethena, has plummeted by more than half, by $8.5 billion. This occurred over several weeks following the record crypto market crash on October 10th, when traders faced record losses on liquidated trading positions, which in nominal futures positions alone approached $20 billion in a single day.

The crash served as a trigger for a decline in investor confidence in the synthetic backing used by USDe during a period of stress, as noted by analysts at 10x Research. The drop in USDe's market cap is the largest decline among stablecoins in 2025. While other major stablecoins also saw a decrease in this metric, it was localized and constituted an insignificant portion. All other major stable tokens in the top five have seen growth during this time.

USDe is the fourth-largest stablecoin by market capitalization, but unlike many, it is not backed by the US dollar—its peg to the dollar is ensured not by assets but by a "delta-neutral" position, where, for example, BTC is simultaneously bought and sold (long and short).

This business model has made the protocol one of the most profitable in the sector, with nearly $400 million in earnings since the beginning of the year, second only to USDC issuer Circle and USDT issuer Tether.

From July 2025 to the beginning of October, USDe's market capitalization nearly tripled, reaching a peak of $14.8 billion. After the cryptocurrency crash on October 10th, when traders lost a record amount of money on liquidated trading positions—nearly $20 billion—the supply of USDe began to decline. By December 24th, the figure had dropped to $6.3 billion, according to Defillama.

ENA—the native token of the Ethena project—also recorded negative dynamics. The asset's price fell by 60% since the beginning of October to $0.2 by December 24th. Since the beginning of the year, the asset has lost nearly 80%.

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Related Questions

QWhat happened to the market capitalization of Ethena's USDe stablecoin after the October crypto market crash?

AThe market capitalization of Ethena's USDe stablecoin plummeted by more than half, dropping from its peak by $8.5 billion.

QWhat was the trigger for the decline in investor confidence in USDe's synthetic collateralization model?

AAnalysts from 10x Research noted that the market crash was a trigger, reducing investor confidence in the synthetic collateralization model during a period of stress.

QHow does USDe's peg to the dollar differ from other major stablecoins?

AUnlike many stablecoins, USDe is not backed by the US dollar or physical assets. Its peg is maintained through a 'delta-neutral' trading strategy, such as simultaneously holding long and short positions on assets like Bitcoin.

QWhat was the performance of Ethena's native token, ENA, following the market events?

AThe price of the ENA token fell by 60% from the beginning of October to $0.20 by December 24, and it had lost nearly 80% of its value since the beginning of the year.

QDespite the crash, how did USDe's protocol perform in terms of revenue in the sector prior to these events?

APrior to the crash, the protocol's business model made it one of the most profitable in the sector, generating nearly $400 million in revenue since the beginning of the year, second only to Circle (USDC) and Tether (USDT).

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