{"id":4463,"date":"2025-11-04T16:03:23","date_gmt":"2025-11-04T16:03:23","guid":{"rendered":"https:\/\/tde.fi\/founder-resource\/"},"modified":"2025-11-04T16:19:35","modified_gmt":"2025-11-04T16:19:35","slug":"93-million-defi-loss-another-depegged-story","status":"publish","type":"post","link":"https:\/\/tde.fi\/founder-resource\/blogs\/stablecoin\/93-million-defi-loss-another-depegged-story\/","title":{"rendered":"$93\u202fMillion DeFi Loss – Another depegged story!!"},"content":{"rendered":"\n

Another Depegged Story, on Tuesday, Stream Finance –  a Polychain-backed DeFi platform known for \u201cmarket-neutral\u201d yield strategies<\/strong>, an outside fund manager handling some of their assets lost about $93 million. <\/strong>After that, the platform <\/strong>abruptly suspended all deposits and withdrawals. And to make it worse, their stablecoin $XUSD also depegged 25% <\/strong>making the $XUSD<\/strong> token goes from $1.2 to $0.25 down by 72% in just 1 day!<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Source:@StreamDeFI<\/em><\/strong><\/p>\n\n\n\n

Let\u2019s try to make sense of all of these. Why this depegged was originated in the first place is that a bug, an oracle error, or more than that!! <\/p>\n\n\n\n

Causes of the $93\u202fMillion Loss<\/h2>\n\n\n\n

From research, Stream Finance\u2019s loss did not originate from a simple technical bug or one-off hack \u2013 instead, it appears to be the highly leveraged, off-chain strategies<\/strong> that burst out under stress. According to on-chain investigations and security researchers, Stream operated as a recursive looping yield platform<\/strong>. Users would deposit stablecoins (primarily USDC) into Stream in exchange for $XUSD<\/strong> \u2013 a yield-bearing token that Stream marketed as a \u201cmarket-neutral fund<\/strong>\u201d aiming for stable high returns of around 95% APY<\/strong>. <\/p>\n\n\n\n

Behind the scenes, however, Stream and its partner protocols engaged in circular lending and minting between multiple \u201cstable\u201d assets<\/strong>, drastically multiplying leverage:<\/p>\n\n\n\n

Stablecoin-on-Stablecoin Collateral Loop:<\/strong> Stream\u2019s XUSD was not fully backed 1:1 by reserves<\/strong>; instead, Stream would take user deposits (e.g., USDC), swap or bridge them to acquire Elixir Network\u2019s stablecoin \u201cdeUSD\u201d<\/strong>, and then use deUSD as collateral in lending markets to borrow more stablecoins. Those borrowed funds would then be bridged back and used to mint additional XUSD<\/strong> \u2013 essentially minting Stream\u2019s own token using borrowed liquidity<\/strong>. This recursive leverage loop<\/strong> meant the same capital was reused multiple times across protocols. In one traced example, roughly $1.9 million in USDC was cycled to mint about $14.5 million XUSD<\/strong> \u2013 an astonishing ~7.6\u00d7 leverage.
<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Stream\u2019s strategy was intertwined with Elixir\u2019s \u201cdeUSD\u201d stablecoin<\/strong> in order to create a perpetual motion machine of borrowing and minting. <\/p>\n\n\n\n

Elixir (deUSD)<\/strong> would lend millions of USDC into isolated lending pools that accepted XUSD as collateral<\/strong>, allowing Stream to borrow those USDC against newly minted XUSD and loop again<\/strong>. Essentially, Stream and Elixir were shuffling the same collateral back and forth<\/strong> \u2013  <\/em>For example, <\/em>on one network (Plasma<\/strong>), Elixir supplied ~$70 million USDC and Stream borrowed over $65 million against XUSD<\/strong> in a Morpho lending market. <\/p>\n\n\n\n

This allowed over $14 million XUSD to be created from just < $2 million real capital<\/strong> in a single day\u2019s looping. That\u2019s what leverage means!!
<\/p>\n\n\n\n

Apart from that, <\/strong>Stream\u2019s on-chain \u201cProof of Reserves\u201d (PoR) was always \u201ccoming soon\u201d<\/strong> , meaning outsiders had little visibility into its true collateralization. The platform reported ~$160\u2013170M<\/strong> in user deposits vs. ~$520\u2013530M<\/strong> in \u201ctotal assets across strategies,\u201d reflecting ~3\u20134\u00d7 leverage. Stream Finance<\/strong> and Elixir Network <\/strong>didn’t just discover yield farming. They discovered financial perpetual motion.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

They turned $1.9 million<\/strong> into $14.5 million<\/strong>. <\/p>\n\n\n\n

How? By backing a stablecoin with another stablecoin that was backed by the first stablecoin.<\/p>\n\n\n\n

So in a way we can say that $14.5M of ‘Stablecoin’<\/strong> Was just backing itself. Isn\u2019t it??<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Source:X<\/em><\/strong><\/p>\n\n\n\n

Hyperithm, quietly pulled the Assets!!<\/h1>\n\n\n\n

The “institutional” yield manager, Hyperithm, quietly pulled $10 million out before all these collapses. They literally released an official post explaining everything and telling we have done the math and we are out of these, within 2 days all the mHYPER liquidity was pulled off from xUSD & yUSD Vaults.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Timeline for Hyperithm Pull Off<\/em><\/strong><\/h3>\n\n\n\n
\"\"<\/figure>\n\n\n\n

The Missed Kill-Switch: That Should\u2019ve Been There<\/h2>\n\n\n\n

Always in liquidation, or while leveraging any assets, liquidation isn\u2019t a last-minute thing; it\u2019s an always-on discipline. Meaning, we track live equity\u2014assets minus liabilities\u2014and we hard-code a principal floor that cannot be crossed. <\/p>\n\n\n\n

If the original capital was $1.9 million<\/strong> in stables, the engine must be wired so that the moment live equity<\/strong> falls above it, the system automatically stops , that was the major precaution they should have taken but stream finance leveraged the stack without enforceable precautions\u2014no binding collateralization bands that auto-delever\/stops on volatility cross, no collateralization ratio was mentioned. <\/p>\n\n\n\n

These safeguards really matter because leverage makes time your enemy.<\/p>\n\n\n\n

Conclusion<\/h2>\n\n\n\n

The collapse of Stream Finance\u2019s XUSD and the $93 million loss serve as a sharp reminder that there are no free lunches in DeFi<\/strong>.<\/p>\n\n\n\n

High yields often come hand-in-hand with hidden risks, and when those risks materialize, they can threaten the stability of many interconnected projects. <\/p>\n\n\n\n

Users, Founders & Investors always need to DYOR (Do Your Own Research) >> Over HYPE, Hyperitm did that and saved a major hit to their asset management fund!! <\/p>\n\n\n\n

Especially wrapped assets and stablecoins,<\/strong> they are the foundational pillars of the crypto ecosystem, can be particularly vulnerable to such events, as trust and collateral integrity are very important for them. <\/p>\n\n\n\n

In this incident, wrapped products like xBTC\/xETH proved only as good as their issuer, and exotic stablecoins like <\/em>XUSD<\/em><\/strong>, <\/em>deUSD<\/em><\/strong>, and <\/em>scUSD<\/em><\/strong> crumbled without any solid foundations.<\/em> <\/p>\n\n\n\n

So the next time you see 95% APY<\/strong> <\/p>\n\n\n\n

Ask yourself, “Am I earning yield, or am I the yield?”<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Another Depegged Story, on Tuesday, Stream Finance –  a Polychain-backed DeFi platform known for \u201cmarket-neutral\u201d yield strategies, an outside fund manager handling some of their…<\/p>\n","protected":false},"author":12,"featured_media":4469,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,199,165],"tags":[],"class_list":["post-4463","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blogs","category-defi","category-stablecoin"],"_links":{"self":[{"href":"https:\/\/tde.fi\/founder-resource\/wp-json\/wp\/v2\/posts\/4463","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/tde.fi\/founder-resource\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/tde.fi\/founder-resource\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/tde.fi\/founder-resource\/wp-json\/wp\/v2\/users\/12"}],"replies":[{"embeddable":true,"href":"https:\/\/tde.fi\/founder-resource\/wp-json\/wp\/v2\/comments?post=4463"}],"version-history":[{"count":4,"href":"https:\/\/tde.fi\/founder-resource\/wp-json\/wp\/v2\/posts\/4463\/revisions"}],"predecessor-version":[{"id":4475,"href":"https:\/\/tde.fi\/founder-resource\/wp-json\/wp\/v2\/posts\/4463\/revisions\/4475"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/tde.fi\/founder-resource\/wp-json\/wp\/v2\/media\/4469"}],"wp:attachment":[{"href":"https:\/\/tde.fi\/founder-resource\/wp-json\/wp\/v2\/media?parent=4463"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/tde.fi\/founder-resource\/wp-json\/wp\/v2\/categories?post=4463"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/tde.fi\/founder-resource\/wp-json\/wp\/v2\/tags?post=4463"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}