October crash triggers confidence shock

Ethena’s synthetic stablecoin USDe has suffered a sharp contraction since the Oct. 10 market crash, with roughly $8.3 billion exiting the protocol as investors reassessed the risks tied to leveraged and synthetic-backed designs.

According to a report by 10x Research, the October sell-off marked a decisive turning point for the broader crypto market, ending a prolonged bull phase and ushering in a period of aggressive deleveraging. The event erased an estimated $1.3 trillion in total crypto market value — nearly 30% of capitalization at the time — making it the largest liquidation episode in the industry’s history.

USDe, which maintains its dollar peg through synthetic collateral and hedging strategies rather than traditional fiat reserves, was particularly vulnerable to the shift in sentiment. Data from CoinMarketCap shows the stablecoin’s market capitalization falling from nearly $14.7 billion on Oct. 9 to about $6.4 billion just over two months later, reflecting what analysts described as a “sharp loss of confidence.”

USDe's Binance Price Glitch

Market stress peaked during the Oct. 10 turmoil, when USDe showed that it had lost its peg and dropped to around $0.65 just on the Binance exchange. The episode fueled concerns among traders already wary of complex stablecoin structures amid widespread liquidations.

Ethena Labs founder Guy Young later clarified that the price dislocation stemmed from an internal oracle issue at the exchange, not from flaws in USDe’s collateral backing, protocol design or redemption mechanics. He added that minting and redemptions continued to operate normally during the crash, with roughly $2 billion redeemed within 24 hours across major decentralized finance platforms and only minor price deviations observed elsewhere.

While the peg ultimately stabilized, the incident underscored how quickly confidence can erode when synthetic and hedged systems are tested under extreme market conditions.

The Oct. 10 crash resulted in more than $19 billion in forced liquidations, according to CoinGlass, while crypto open interest fell by roughly $65 billion. In the aftermath, broader market activity has slowed markedly.

Deleveraging spreads as liquidity thins

Trading volumes across crypto markets are down around 50%, and US-listed spot Bitcoin exchange-traded funds have recorded approximately $5 billion in net outflows since late October. Analysts at 10x Research say the pullback reflects a retreat by regulated and institutional capital rather than a wave of retail capitulation.

As leverage and liquidity drain from the system, Bitcoin — trading near $87,700 at the time of writing — has increasingly behaved like a standalone risk asset, decoupling from both equities and gold instead of serving as a macro hedge.

For USDe and similar products, the shift has highlighted how rapidly sentiment can turn when confidence in complex financial engineering falters under stress.