USDe, the synthetic dollar issued by Ethena Labs, has lost nearly 70% of its scale from its peak a year after the market event known as the "1011 crash." Its circulating supply fell from about $14.7 billion to under $5 billion, and the token slipped from the world’s third-largest stablecoin to fifth place.
Data cited from ARK Invest analyst Lorenzo Valente shows how hard it is to break into the upper tier of the stablecoin market. Over four years, the number of stablecoins with market capitalizations above $1 billion rose only from single digits to 12. At the $10 billion level, there were four players at the 2022 peak; now only Tether and Circle remain. In a market shaped by network effects, exchange listings, payment integrations and DeFi adoption tend to follow scale rather than create it.
How USDe was originally built
USDe was launched in February 2024 by Ethena Labs, the developer of a synthetic dollar protocol. The company’s founder and CEO is Guy Young. Early backers included Dragonfly, Binance Labs, Bybit and OKX Ventures.
Its original design did not rely directly on cash and U.S. Treasuries to maintain a $1 value, nor did it use the overcollateralized vault model seen in Sky’s former MakerDAO ecosystem with DAI and USDS. Instead, Ethena built USDe around a delta-neutral hedging structure. The protocol held spot crypto assets such as ETH and related staked assets, while opening matching short derivatives positions on exchanges to offset price swings in the underlying collateral.
This kind of spot-plus-short arbitrage has long been used by hedge funds and market makers. Ethena turned it into an onchain token. Returns mainly came from two sources: native yield on staked collateral and funding-rate income collected from short perpetual positions. Those two streams formed the basis of returns for users holding the staked version, sUSDe.
That said, "no cash" described the early design, not the full reserve structure that came later. Ethena’s August 2025 governance report showed that about 54% of USDe collateral consisted of stablecoin-backed assets, while roughly 46% was tied to positions related to the delta-neutral strategy.
How it climbed to No. 3
From 2024 into 2025, the broader crypto market strengthened, and perpetual funding rates stayed positive for long stretches. That meant short positions could collect funding payments, lifting the yield profile attached to USDe.
Leverage loops in DeFi pushed growth even harder. Strategies built around Ethena assets on Aave and Pendle became known in the industry as "Aavethena." Users deposited related assets on Aave as collateral, borrowed against them and rotated the proceeds back into USDe-linked positions. Others used Pendle’s principal and yield token markets to combine yield trades with lending leverage.
According to industry research firm Stablecoin Insider, Pendle’s total value locked rose from about $3 billion to $10 billion between May and August 2025. By September, USDe and related derivatives accounted for about 75% of all value locked on Pendle. Before the "1011 crash," USDe’s circulating supply stood at roughly $14.7 billion, or about 5% of the total stablecoin market, behind only USDT and USDC.
The day it hit $0.65
On Oct. 11, 2025, the crypto market went through one of the largest liquidation events on record. CoinGlass counted more than $19 billion in liquidations across the market over a rolling 24-hour period, a record at the time. Research firm 10x Research estimated that in the weeks after the Oct. 10 sell-off, total crypto market capitalization fell by about $1.3 trillion.
USDe was pulled into the center of that move. On Binance, the token briefly dropped to $0.65. On Bybit, the low was about $0.92. Prices in major onchain pools across trading venues stayed close to $0.99.
According to a post-mortem on Ethena’s governance forum, Binance’s internal oracle at the time used only its own order book to price USDe, which amplified the dislocation during extreme volatility. At the same time, deposit and withdrawal disruptions at some trading firms limited cross-platform arbitrage.
Between Oct. 10 and Oct. 11, about $1.9 billion in USDe redemptions were processed. Analysts at crypto media outlet Blockworks said the large redemption wave was handled quickly and that the mechanism showed strong resilience.
Still, that only established that the redemption channel and reserve system held up under pressure in that episode. Whether users could redeem through the protocol, whether they could sell near $1 on exchanges, whether reserve assets were sufficient to cover liabilities, and whether those assets could be liquidated quickly during concentrated outflows are four separate questions.
Redemptions stayed open, but capital left
Open redemptions did not prevent a loss of confidence.
USDe supply was about $14.7 billion on Oct. 9, 2025. By the end of that month it had fallen to about $9.2 billion. By the end of December, cumulative net outflows had reached about $8.3 billion, leaving circulation at roughly $6.3 billion. Over the same period, governance token ENA fell about 62% and dropped below $0.2.
The outflows were not only about panic. After the liquidation event, perpetual funding rates fell sharply, and short positions could no longer count on stable funding income. Leveraged looping positions on protocols such as Aave were also unwound, and redeeming USDe became part of the process for some users closing those trades.
At the same time, yield-bearing stablecoin products such as Sky’s sUSDS and Maple Finance’s syrupUSDC were drawing inflows.
Hedge exposure fell to about 1%
In 2026, Ethena gradually changed the composition of USDe reserves. Governance reports showed that crypto basis-trade positions accounted for 11.4% of reserves at the end of March 2026, 13.3% at the end of April, and about 1% by the end of June. The article notes that this basis-trade measure is not fully comparable with the perpetual-related position metric used in the August 2025 report.
At the end of April 2026, about 57.2% of reserves were in liquid stablecoins, 29.3% in DeFi lending positions and about 0.3% in institutional lending. By the end of June, institutional lending had risen to about 6.9%, and reserves also included assets such as tokenized collateralized loan obligation, or CLO, instruments.
Ethena also laid out four diversification directions: expanding tokenized assets beyond short-term U.S. Treasuries, extending the delta-neutral framework to equity and commodity perpetuals, growing institutional lending, and exploring prime-brokerage-style lending for trading firms.
Institutional credit became one of the more important new paths. Ethena started allocating part of its stablecoin reserves to institutional lending through partner structures for overcollateralized loans. Those arrangements involve separate functions for loan origination, collateral management and third-party custody, and the risk profile depends on the loan structure and how responsibilities are split among participants.
Anchorage Digital Bank also serves as the U.S. issuer for Ethena’s institutional stablecoin USDtb. On Aug. 19, 2026, institutional broker FalconX said it had partnered with Ethena on a roughly $1 billion secured financing arrangement through a bankruptcy-remote special purpose vehicle, with the capital earmarked for overcollateralized institutional credit.
As basis-trade exposure shrank, the center of risk shifted with it — away from funding-rate dynamics and exchange counterparty exposure, and toward broader asset-allocation risk, including DeFi protocol risk, borrower solvency and the ability to liquidate loan collateral during extreme market conditions.
sUSDe’s share and yield both declined
sUSDe also made up a smaller share of total USDe supply over time. Ethena’s September 2025 governance report put sUSDe at about $6.15 billion against total USDe supply of about $14.5 billion, or roughly 43%. Industry analysis compiled from DefiLlama data put that ratio at about 27% in August 2026.
USDe did not recover to its pre-liquidation scale in 2026. It stood at about $5.92 billion in mid-March. On Aug. 22, DefiLlama data showed circulation at about $4.1 billion, ranking it fifth among stablecoins with about 1.33% of the market. At its peak, it had been the third-largest stablecoin with about 5% share. Market data on Sept. 19 showed supply had recovered to about $4.8 billion.
Yield levels also moved far below their earlier highs. DefiLlama data showed USDe annualized yield briefly exceeded 50% in early March 2024, then fell to about 4.3% in late December 2025. The article notes that both figures are annualized snapshots at specific points in time and do not represent realized monthly returns.
New channels, different users
One of the main engines behind USDe’s earlier growth was the leveraged loop built around it on Aave and Pendle. Ethena is now trying to broaden distribution through institutional investment management and payments.
USDe has been integrated into BlackRock’s Aladdin investment management platform and included in the collateral framework for crypto yield products at U.S. retail brokerage Robinhood. The article makes clear that these are platform integrations and product connections, not evidence that BlackRock directly holds or endorses USDe.
In September 2026, Ethena also moved into payments. On Sept. 1, it launched Ethena Pay, a self-custodial financial app running on Avalanche that remains in testing. The product offers yield on dollar balances and cashback on card spending. Balance yield can reach as high as 6%, but that figure includes adjustable promotional rewards and is not a guaranteed interest rate. Standard spending cashback can reach as high as 5%, paid in AVAX.
On Sept. 11, USDe and sUSDe went live on Tron, extending Ethena’s multichain footprint.
A different stablecoin from a year ago
The large liquidation event a year ago tested USDe’s hedging model. The redemption channel held up, but capital kept leaving over the following months.
One year later, Ethena has reduced basis-trade exposure to a small part of reserves and shifted more capital into stablecoins, DeFi lending, institutional loans and tokenized credit assets. That means USDe is no longer tied as tightly to perpetual funding rates. It also means the main risks now extend beyond trading markets to borrower solvency, collateral liquidation and the liquidity of credit assets.
The open question is what happens in the next redemption wave on the scale of $1.9 billion. Loans arranged through institutions such as Anchorage and Maple may not turn back into cash as quickly as closing a short futures position.
