TL;DR:
Stream Finance, a once-prominent decentralized finance platform, has suspended all operations after disclosing a staggering $93 million loss, sending shockwaves through the DeFi ecosystem. The platform’s collapse follows the sharp devaluation of its native XUSD stablecoin, which lost nearly 70% of its value within hours, raising renewed fears about stability risks in algorithmic and hybrid-backed stablecoins.
Yesterday, an external fund manager overseeing Stream funds disclosed the loss of approximately $93 million in Stream fund assets.
In response, Stream is in the process of engaging Keith Miller and Joseph Cutler of the law firm Perkins Coie LLP, to lead a comprehensive…
— Stream Finance (@StreamDefi) November 4, 2025
The $93M loss stemmed from a liquidity imbalance and flawed collateral strategy. According to project statements, the protocol faced an “unexpected liquidity drain” after the collateral reserves backing XUSD were mismanaged across multiple lending pools. This misallocation led to a cascading effect that made redemption nearly impossible as panic withdrawals spread through the system. Analysts note that the magnitude of the loss mirrors earlier DeFi collapses, underscoring persistent risks in stablecoin design.
Stream Finance’s management has frozen all platform activity to prevent further losses. Trading, lending, and withdrawals were paused indefinitely as developers investigate the underlying cause of the imbalance. The project stated that it plans to work with external auditors to assess the damage and explore potential recovery mechanisms, but investors have already expressed frustration over the lack of timely transparency. Some community members have criticized the platform’s communication strategy, describing it as “reactive” and “opaque” amid growing anxiety.
The XUSD crash highlights DeFi’s ongoing struggle with stability and trust. The stablecoin, initially pegged to $1, dropped to $0.29 at its lowest point before partially recovering to $0.48. This volatility not only wiped out millions in user holdings but also eroded confidence across DeFi protocols with similar hybrid reserve models. The event reignited discussions on stricter proof-of-reserve standards and real-time audit requirements. Observers warn that without these reforms, the sector risks facing deeper structural fragility as user confidence continues to decline.
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