As $1 billion in redemptions rippled by way of the market, Ethena Labs insists its artificial greenback, USDe, labored precisely as designed and that Binance’s personal pricing techniques triggered the meltdown.
This weekend’s market saga affected all crypto sectors, with stablecoins additionally caught within the crosshairs following a supposed glitch on the world’s largest change.
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Ethena Defends In opposition to $1 Billion Binance Meltdown
In an in depth publish on X (Twitter), Ethena founder Man Younger pushed again in opposition to claims of a USDe Depeg. He says the protocol’s minting, redemption, and collateral features operated usually all through the market crash.
“Ethena’s mint and redeem perform had zero downtime… [the protocol processed] greater than $1 billion in withdrawals in a couple of hours and $2 billion in a 24-hour interval with zero points,” Younger stated.
Based on Younger, the chaos stemmed from a single venue, the Binance change, whose inner oracle index diverged from the deepest swimming pools of on-chain liquidity.
The change’s orderbook started referencing its personal spot costs as a substitute of broader market knowledge, and USDe’s quoted worth briefly collapsed. Market makers, unable to arbitrage as a result of change lag and deposit freezes, have been sidelined as automated liquidations rippled by way of Binance’s unified collateral system.
Analyst Pavel Altukhov, who referred to as it an ideal storm, alleged that Binance’s unified account setup permits all belongings for use as collateral. When costs of USDe and different belongings like wBETH dropped, merchants confronted pressured gross sales to take care of margin, amplifying promote strain throughout the platform.
“Merchants needed to cowl unfavorable PnL and meet new margin necessities, whereas their USDe did solely half the job because of the depeg,” Altukhov wrote.
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In the meantime, different analysts questioned whether or not the occasion was a coordinated manipulation or a technical misfire. Analyst ElonTrades claimed somebody deliberately exploited Binance’s inner value feeds, figuring out that the system used these costs to calculate collateral values.
For the layperson, when USDe’s value briefly fell on Binance, many DeFi cash markets (like Curve, Fluid, and others) used a “hardcoded” peg. This implies they handled USDe as equal to USDT or USDC (1:1) for collateral and lending functions.
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So although Binance’s inner value feed confirmed USDe dipping beneath $1, DeFi protocols ignored that short-term drop as a result of they have been referencing a hard and fast peg or deep on-chain liquidity swimming pools, not Binance’s inner orderbook knowledge.
Tether CEO Paolo Ardoino rode on the rhetoric to advocate USDT as the selection collateral for derivatives and margin buying and selling.
“USDT is the perfect collateral for derivatives and margin buying and selling. Liquid, examined by fireplace. For those who use low liquidity tokens, comparable to bananas, a horse, three olives, and chewed bubble gum as collateral, then brace your self when the market strikes,” he wrote.
Ethena Turns to Transparency and Oracle Reform After the Chaos
In response, Ethena has launched detailed steering for Oracle design and threat administration. The USDe stablecoin issuer emphasizes the necessity to distinguish between “short-term dislocation” and “everlasting impairment” of collateral.
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The workforce additionally affords real-time proof-of-reserves (PoR) entry to exchanges and oracle suppliers. This contains Chaos Labs and Chainlink, to allow on-demand verification of USDe’s backing.
Trade voices largely welcomed that transparency push. Researcher Wang Xiaolou stated Ethena’s strategy “is sensible.” The analyst argues that pegging USDe to USDT in DeFi markets throughout volatility helps keep away from pointless liquidations. On the identical time, PoR-based triggers can tackle true impairment if it ever happens.
Nonetheless, some analysts stay cautious, together with Duo 9, who warned that whereas DeFi cash markets escaped unscathed this time.
“USDe misplaced peg on Binance after the crash was over. This was Binance-related, and DeFi escaped because of the hardcoded peg to USDT. Subsequent time, the panic could begin in DeFi, and redemption velocity gained’t assist. USDe stays a high-risk asset,” the analyst wrote.
Claims articulate that Ethena’s system didn’t break, and that the venue (Binance) did. Nevertheless, the incident exposes a deeper structural challenge. Centralized change knowledge feeds can ignite systemic stress throughout an more and more interlinked CeFi-DeFi taking part in discipline.