During Friday’s turbulent market sales, Ethena’s synthetic dollar, USDE, which maintains its 1: 1-stick to USD through cash-and-transport arbitrage, fell briefly and hit 65 cents on Binance.
However, this dramatic dislocation was limited to binance as opposed to the global de-pegging of USDE, as Social Media Chattering suggests.
Most trading in USDE occurs on decentralized platforms such as fluid, curve and uniswap – venues with hundreds of millions of dollars in liquidity.
In contrast, Binance has only tens of thousands of millions in USDE liquidity. Price deviations on the curve were less than 100 basic points, in accordance with the mild volatility of USDC and USDT on binance. At BYTBIT, USDE only moderately, to about 92 cents on Bybit, dipped a sharp contrast to Binance’s jump.
So what went wrong with Binance? First, unlike Bybit and other exchanges with direct dealer conditions that enable seamless mint and redemption of USDE on their platforms, Binance lacked this connection. This absence prevented market manufacturers from performing PEG arbitrage quickly as Binance’s infrastructure tightened under volatility and thus failed to restore balance during sales.
Another question was Binance’s Oracle, referring to prices from his own relatively illiquid order book that caused massive liquidations of USDE positions. Instead, it should have focused on floating roads like curve. It led to automated liquidation that cascades through Binance’s overall security system, which led to an exaggerated price drop in USDE.
Dragonfly’s CEO Haseeb Qureshi expressed the best, as Coindesk previously reported: “Good liquidation mechanisms do not trigger flash accidents. If you are not the primary place of an asset (which binance is not for usde), look at the price of the primary place.”
Guy Young, founder of ethena labs, described the appropriate episode as an isolated event caused by binance and not a global de-peg.
“The serious price deviation was isolated to a single place referring to the Oracle index of its own order book, not the deepest pool of liquidity, and faced deposits and withdrawal problems during the event that did not allow market producers to close the loop,” said Guy Young, founder of Ethena Labs, on X.
According to Young, it was possible to redeem USDE as supply fell from $ 9 billion to $ 6 billion almost immediately, without any base positions being unused, showing how resistant redemption mechanism is.
Throughout the trial, USDe over -collateralized by approx. $ 66 million, as confirmed by independent attestors, including leading companies such as Chaos Labs, Chainlink, Llama Risk and Harris & Trotter.
In short, USDE’s PEG remained strong, where it means the most, but Binance’s technical problems made it look like there was a depeg.
