TLDR:
- Top expert warns of $93M xUSD collapse tied to Morpho and Euler lending exposure.
- Depeg triggered by collateral drain and mass liquidations in Stream Defi’s xUSD pools.
- Morpho and Euler confirm exposure monitoring as users face liquidity losses.
- Analysts urge stronger collateral rules and transparency in DeFi stablecoin design.
A DeFi expert has sounded the alarm after the xUSD stablecoin crashed, leading to a reported $93 million loss across lending protocols. The collapse affected users with exposure to Morpho Labs and Euler Finance, two platforms integrated into Stream Defi’s xUSD ecosystem.
Lending Pools Face Shock as xUSD Stablecoin Implodes
According to market expert @DU09BTC, the depeg occurred after xUSD’s underlying collateral fell sharply, triggering a cascade of redemptions and liquidations. As users rushed to exit, liquidity evaporated, pushing the token’s value far below its intended $1 peg.
Consequently, lenders in Morpho and Euler who held xUSD-backed positions saw collateral vanish within hours. The expert warned that the event underscores risks in DeFi architectures where assets are cross-collateralized or dependent on thin liquidity pools.
Besides the financial hit, the episode revived discussions around on-chain risk management and stablecoin transparency. Market participants are now urging platforms to strengthen safeguards against cascading liquidations.
Get your money out of @MorphoLabs and @eulerfinance!
Here's why.
They take your USDC and give it out to insolvent protocols that leverage loop scam stables like xUSD by Stream Defi which just lost $93M of user money.
The incentives are totally misaligned. Curators on Morpho… pic.twitter.com/38fH6Nkczt
— Duo Nine
YCC (@DU09BTC) November 4, 2025
Morpho and Euler Respond Amid Ongoing Liquidity Drain
In a post-event update, Morpho Labs confirmed that it is monitoring affected markets and assessing exposure linked to Stream Defi’s xUSD. While Morpho itself did not issue the stablecoin, it acknowledged that certain lending markets used it as collateral.
Euler Finance has yet to release a full statement but advised users to review their positions and avoid volatile collateral types. On-chain data shows that large liquidity providers began withdrawing assets soon after the depeg, compounding the selloff.
Moreover, analysts note that liquidity pools holding xUSD have seen their total value locked drop sharply within 24 hours. The decline suggests that confidence in synthetic stablecoins remains fragile, particularly those relying on algorithmic mechanisms.
@DU09BTC noted that this incident should serve as a cautionary tale for developers and investors. Without stronger transparency frameworks and collateral diversity, he warned, DeFi lending platforms could face more abrupt collapses.
The post Expert Warns of $93M xUSD Collapse Tied to Morpho and Euler Lending Exposure appeared first on Blockonomi.
Source: https://blockonomi.com/expert-warns-of-93m-xusd-collapse-tied-to-morpho-and-euler-lending-exposure/