A storm of trust and transparency is sweeping across the crypto world.

“When everything that could be borrowed with USDX was borrowed.”

This warning post on X (formerly Twitter) on November 6 marked the start of a long-brewing stablecoin crisis finally breaking to the surface.

On DeFi lending protocols such as Euler, nearly all assets that could be borrowed against USDX and sUSDX were drained. Borrowing rates in some pools spiked past 800% APY.

Meanwhile, on-chain addresses linked directly to Stables Labs founder Flex Yang began aggressively borrowing other stablecoins and transferring them to exchanges — an alarming move that triggered widespread market panic.

The USDX Depeg: A Real-Time Breakdown

The USDX depegging event served as a mirror, reflecting the fragility of decentralized stablecoins under extreme market stress.

▪ USDX, issued by usdx.money, completed a $45 million funding round at a $275 million valuation late last year.

▪ Like Ethena’s USDe, USDX adopts a delta-neutral hedging strategy, but unlike Ethena, it also uses altcoins as part of its trading strategy — amplifying returns, but also risk.

▪ Before the meltdown, addresses directly linked to Stables Labs’ founder began showing unusual on-chain behavior: ignoring soaring borrow rates, these wallets drained all assets available for borrowing against USDX and sUSDX across multiple platforms.

Notably, one address beginning with 0x50de started accumulating large amounts of USDX and sUSDX in late October and proceeded to borrow USDT, USDC, and USD1 from Euler, Lista DAO, and Silo, transferring nearly all funds to Binance shortly after borrowing.

When it ran out of collateral to leverage, the address swapped USDX for USDT on PancakeSwap and again moved the proceeds to exchanges. This fire-sale exodus raised serious concerns about the true reserve backing of USDX.

The Cautionary Tale of USDe

USDX isn’t the first synthetic stablecoin to face depegging risk. On October 11, USDe — the world’s third-largest stablecoin — plummeted to $0.65, losing roughly 34% of its peg.

That day, the crypto market experienced an “epic crash.”

Bitcoin tumbled from $117,000 to $105,900, a single-day drop of 13.2%.

▪ On Uniswap, liquidity in the USDe–USDT pool collapsed to $3.2 million, down 89% from pre-event levels. A sell order of 100,000 USDe experienced 25% slippage, filling at $0.62 instead of $0.70.

▪ Unlike USDX, USDe quickly rebounded, recovering to $0.98 within hours.

▪ The recovery was fueled by Ethena Labs’ third-party reserve attestation, confirming a collateralization ratio above 120%, backed by $66 million in excess collateral.

▪ Most importantly, USDe’s redemption mechanism remained fully operational — users could redeem ETH and BTC collateral anytime, anchoring market confidence during the crisis.

The Security Spectrum of Stablecoins

Comparing USDX, USDe, and traditional fiat-backed stablecoins like USDT and USDC reveals a clear hierarchy of safety.

The takeaway: transparency and collateral quality directly determine stability.

USDX’s opaque structure and questionable backing made it vulnerable, while USDe’s transparency and robust reserves allowed for a swift recovery.

Structural Risks in DeFi

The USDX and USDe depegging episodes exposed deeper structural flaws within the DeFi ecosystem.

Delta-neutral stablecoins are not truly stablecoins in the traditional sense — they function more like structured financial derivatives of a protocol rather than independent monetary units.

Key issues include:

▪ High-risk strategies & opaque execution

USDX’s complex delta-neutral model extended into altcoins, heightening exposure. Most of these strategies run off-chain on centralized exchanges, turning the project into a black box with no verifiable transparency.

▪ Inter-protocol leverage and recursive collateralization

DeFi protocols are deeply interwoven. Some synthetic assets are built on top of themselves, creating recursive leverage loops. For example, crvUSD can use a stablecoin derivative of crvUSD as its own collateral to mint more crvUSD — making it nearly impossible to trace how much leverage exists even when all data is on-chain.

Why Large Stablecoins Remain More Resilient

Given USDX’s collapse and USDe’s brief depeg, investors are asking:
Why do giants like USDT and USDC remain stable?

▪ Scale and institutional adoption

According to CertiK’s 2025 Skynet Digital Asset Treasury Report, publicly listed companies now hold over $130 billion in digital assets.

Institutional investors prefer audited, custody-backed stablecoins with regulatory compliance and transparent disclosures — a moat that protects USDT and USDC.

▪ Regulatory alignment and disclosure

Circle, issuer of USDC, proactively engages with regulators and regularly publishes reserve breakdowns.

In contrast, USDX and similar projects lack third-party audits or reserve proofs, eroding market trust.

▪ Collateral quality and redemption mechanisms

USDT and USDC are backed by fiat, cash equivalents, and short-term U.S. Treasuries — highly liquid, low-volatility assets.

Synthetic stablecoins like USDX rely on crypto-collateral and off-chain hedging, which can collapse under market stress.

When volatility spikes, capital naturally migrates toward safety — from high-risk synthetic coins to fiat-backed stalwarts like USDT and USDC.

Even after Bybit’s recent hack, over $4 billion in institutional inflows entered the market, reaffirming long-term confidence in quality crypto assets.

In the end, while DeFi innovation continues to push boundaries, one truth remains unchanged: In finance — whether on-chain or off — security and transparency are the ultimate foundations of trust.