Ethena is facing renewed scrutiny after its total value locked collapsed by more than half following October’s severe crypto market liquidation. USDe has driven the downturn, positioning Ethena among the hardest-hit DeFi protocols as investor confidence weakened amid heightened volatility and risk aversion.
USDe recorded roughly $8.3 billion in net redemptions since the major liquidation event on October 10, according to 10x Research. The exodus followed one of the market’s most violent sell-offs, which abruptly reversed leverage conditions and undermined trust in complex, yield-linked, and synthetic collateral structures across decentralized finance.
As of October 9, the market capitalization of USDe was close to being at 14.7 billion. It had fallen to about 6.4 billion slightly less than two months later, according to CoinMarketCap. This extreme contraction put USDe in the category of heavily impacted large stablecoin projects after the crash, which reflected a general withdrawal.
According to on-chain records provided by Wu Blockchain using data supplied by DeFiLlama, Ethena lost its TVL of $14.305 billion during the so-called 1011 event to the current 6.551 billion. The fact that the valuation metrics of Ethena decreased by over 50 percent highlights the extent to which the valuation metrics of Ethena are pegged to the USDe supply and redemption activity.
USDe controls the composition of TVL of Ethena, so that redemptions become a direct source of value shrinkage of locked value. With the increasing selling pressure, capital outflows were quick to establish, and levels that previously billed Ethena as one of the biggest DeFi protocols were drained. The contraction is indicative of the ability of a core asset to increase downside risks.
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The data presented on the dashboard of the Entropy Advisors is even more evidence of the true size of the withdrawals. Since October, USDe has witnessed over $8 billion of net redemptions, and October alone saw the figure exceeding $5 billion.
The extreme decline in TVL indicates the overall attitude of risk-off in DeFi markets that have been observed as investors have been reconsidering their exposure amid the turmoil, and have started a long process of deleveraging, almost 30 percent of total capitalization.
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