DeFi News: sUSDe Loop Trades Worth $1B at Risk

The recent Bitcoin crash on October 10 has jeopardized nearly $1 billion in DeFi positions involving Ethena's staked USDe (sUSDe), according to a report from Sentora Research. Following the market downturn, yields on leveraged strategies such as the sUSDe loop trade have turned negative. This strategy typically involves traders using sUSDe as collateral on platforms like Aave to borrow stablecoins such as USDT and USDC, which they then use to acquire more sUSDe, amplifying their yield. However, the post-crash landscape sees a negative yield spread that threatens to incur losses on these looped positions. Analysts indicate that if borrowing costs continue to exceed yields, it could lead to significant liquidations, with a rising number of positions nearing liquidation thresholds. Traders are advised to monitor the spread between Aave's borrowing annual percentage yield (APY) and sUSDe yield closely, as well as utilization rates in stablecoin lending pools to prevent cascading failures in liquidity.

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