Ethena’s USDe Market Cap Crashes Over $11B In 7 Months, Here’s Why

• Ethena’s USDe synthetic dollar suffered an $11 billion wipeout in its market cap since October last year.
• Falling demand, the long-term effects of the 10/10 liquidation event, and allegations of artificial inflation are key influences on the trend.

The charts reveal a significant risk building around Ethena’s USDe, a synthetic dollar pegged 1:1 to the US dollar. The asset has lost over $11 billion of its market cap since the last quarter of 2025.

USDe’s Supply Crash

According to CoinMarketCap data, USDe reached its all-time high (ATH) market cap of around $14.97 billion in October 2025. From that point, it gradually slid to the present $3.91 billion. Meanwhile, the synthetic dollar’s daily trading volume slumped from an average of $397.92 million to $47.97 million between those periods.

Ethena USDe Market Cap (Source: CoinMarketCap)Zooming into the one-month frame, the asset declined by nearly $2 billion, from $5.88 billion. It reflected the same pattern in its daily trading volume, as it fell by approximately $12 million from more than $60 million during the same timeframe.

ADVERTISEMENTDespite its overall weakening, USDe has maintained its 1:1 peg to the US dollar. It suggests that the asset’s market cap reduction is mainly due to a supply contraction rather than a depegging.

Declining Demand and Capital Rotation

Varying opinions arose about the possible impact of the trend if it persists. However, several analysts blamed the issue on the demand and totally dismissed the depegging concerns. Additionally, they assured that its protocol is not experiencing any failures.

Analysts argued that USDe’s yield compression at around 3.5% coincided with its recent outflows. They claimed that capital appears to be moving toward more established stablecoins, such as Tether’s USDT.

ADVERTISEMENTTether notably minted $1 billion worth of USDT on the TRON (TRX) chain over the weekend, bringing its total mint to roughly $5 billion since mid-April. To date, its market cap stands at nearly $190 billion, with its 24-hour trading volume sitting over $134 billion.

Amid its strong peg, analysts still warned that Ethena’s synthetic dollar is at risk of losing its product-market momentum if the trend sustains in the long run.

The October 2025 Flash Depeg

USDe’s declining supply began during its flash depeg following the 10/10 event last year. It stemmed from the $19 billion liquidation in the crypto market following US President Donald Trump’s imposition of aggressive tariffs on China in response to the latter’s embargo on rare-earth exports.

The liquidity bottleneck on centralized exchanges (CEXs) and the ensuing crypto market crash rattled USDe’s peg, which fell to as low as $0.65 per token on several exchanges. The temporary collapse of its peg exposed the risks inherent in its design, which features a recursive feedback loop between CEX liquidity and decentralized finance (DeFi) liquidations.

Many attribute USDe’s current trend to the event’s long-term impact.

Artificial Inflation of USDe Supply and TVL

Furthermore, allegations are rife that Ethena artificially boosted USDe’s supply and total value locked (TVL) by looping loans through Aave (AAVE). The repeated deposits and lending supposedly created fake data through multiple handovers, with the loops estimated to go for eight rounds.

ADVERTISEMENTThe sudden market deleveraging, volatility, and substantial outflows in the 10/10 incident eventually untangled the loop. Leveraged positions hit liquidation thresholds on Aave, causing USDe’s gradual supply collapse.