‘Not a true depeg,’ says Ethena founder as USDe faces Binance-only slip

Key Takeaways 

How did Ethena’s founder react to the USDe ‘depeg’?

Per the founder, the incident was isolated to Binance because it uses its own oracle.  

What’s the best way to prevent the depeg? 

Tracking external prices with rich liquidity. 

The market is still digesting the 10th of October crash that wiped out over $19 billion in leveraged positions. As one of the escalating factors, Ethena’s [ENA] synthetic stablecoin USDe depeg also hit headlines. 

During the de-leveraging event, USDe dropped sharply to as low as $0.65, about a 35% drop, and effectively depegged from $1 on the Binance exchange. 

Source: USDe/USDT performance (Binance vs Kraken vs Bybit)

In comparison, Bybit had only 5% drop while Kraken’s slipped by about 80 basis points (0.80%).

This underscored that the depegging appeared as an isolated issue within the Binance platform, according to Ethena founder Guy Young.

“I do not think it is accurate to describe this is a USDe depeg when a single venue was out of line with the deepest pools of liquidity that experienced no abnormal price deviations whatsoever.”

Source: X

Why it happened

Ethena reported that mint and redemption stayed online through the chaos, processing more than $2 billion within 24 hours. Its collateral, worth over $9 billion, remained accessible for redemptions.

Young said price dislocations on Curve [CRV], Uniswap [UNI], and Fluid [FLUID] stayed within 30 basis points, in line with USDC–USDT spreads. He stressed that USDe’s core systems never failed — the issue stemmed from Binance’s pricing.

That distinction matters for leveraged traders.

Ethena’s USDe ‘depeg’ solution

Before jumping on Young’s solution, it is better to understand how depegging drives liquidation. 

In leveraged trading, one must deposit collateral to open a position. If you have $100 as collateral and open a 2x long on BTC, your position will be doubled to $200.

However, if the price drops, your losses also increase by 2x. So, a 50% dip would mean forced liquidation of the $100 collateral.

If your fund is in USDe and it drops by 35% due to an issue with price tracking data, the $100 will shrink to $65. A $1 million position would translate to a $350K loss. 

Add leverage in a price decline, and the position will be closed faster than someone with collateral in a stable USDT or USDC. In other words, the stablecoin depeg alone is enough to trigger liquidations. 

Per Young, platforms that track the most liquid and external price of USDe, like those offered by Chainlink [LINK], experienced limited price discrepancy. In fact, DeFi platforms have hardcoded USDe value to USDT, which minimized the bloodbath.

Source: X

That being said, USDe is involved in basis or interest trade hunting to help pay out over 10% rewards to holders. The yield has made it more popular amongst traders, pushing it to the third-largest stablecoin by market cap.  

Unfortunately, it’s not backed 1:1 to the U.S dollar via Treasury bills like the USDT and USDC. Instead, it’s backed by crypto that can heighten depegging risks.

Notably, the risk could spill over to traders with leveraged positions using USDe as collateral.