Ethena Labs’ synthetic dollar-pegged token Ethena USDe (USDE) has lost over $5 billion of its market capitalization since the Oct. 10 market crash, after the asset experienced a major stress test. Before the “Black Friday” flash crash — which wiped out over $19 billion in leveraged positions across the market, becoming the largest liquidation event in crypto to date — USDE’s market cap stood above $14.6 billion. Ethen USDe's market cap fell sharply by about $2 billion on Oct. 10-11 as investors rushed to redeem their USDE, exchanging their tokens for the underlying collateral. According to Ethena Labs’ documentation, each USDE redemption burns the returned USDE, which can reduce the overall token supply, and thus the market capitalization. As Blockworks analysts noted in an Oct. 15 Ethena governance forum post, “approximately $1.9 billion in USDe redemptions were processed between the 10th and the 11th of October.” The analysts added that the large redemption volume was processed quickly, noting Ethena’s mechanism showed “extreme resilience”: “While it [redemption volume] was for $1.6B in a single day and $1.9B in the two days before and after the crash, it is likely realistic to consider that the bulk of this redemption happened in less than a few hours.” Ethena USDe lost another $3 billion in market cap over the rest of October, reaching about $9.2 billion at press time. Ethena USDe market cap in October. Source: CoinGecko The Binance Flash-Crash The nearly 40% drop in market cap is the sharpest one since Ethena USDe’s launch in late 2023. While it’s hard to say what the exact reasons for the massive redemptions are, the token did come under increased scrutiny after Oct. 10, when its price on crypto's largest centralized exchange (CEX) Binance briefly plunged to about $0.65. As The Defiant reported earlier, USDE's dramatic price crash below $1 on Binance — which didn’t occur on other platforms — led to a wave of liquidations on the CEX, resulting in widespread criticism of Binance’s pricing oracle setup. Notably, on Curve Finance and other decentralized protocols, USDE’s price stayed close to its $1 peg during the market volatility. In a blog post on Oct. 12, Binance distanced itself from those accusations, saying instead that the exchange’s core futures and spot matching engines and API trading “remained operational” during the crash. Sam MacPherson, CEO and co-founder of Phoenix Labs, suggested in an X post on Nov. 2 that part of USDe’s decline could also be linked to excessive leverage, noting that the token had become “over-leveraged at 15 billion.” “As I said the more organic size for USDe is around 6-7b and so when the market turns it was always going to reflexively drop to the organic size," MacPherson wrote. The Defiant reached out to Ethena Labs for comment on the shift, but hasn’t heard back by press time. As The Defiant reported earlier, in late September, USDE deposits on Binance surged to reach $735 million just a day after the CEX began offering 12% APR on USDE via its Binance Earn product.