Stream Finance Stablecoin Plunges 77% After Protocol's Fund Manager Loses $93 Million

Stream Finance recently disclosed a significant operational loss, with an external fund manager losing approximately $93 million in user assets. This incident prompted the immediate suspension of all withdrawals and deposits, leading to a dramatic decline in the value of its stablecoin, Staked Stream USD (xUSD), which plummeted by 77%, hitting approximately $0.26. The protocol is working with legal counsel to investigate the incident and prioritize creditor claims. Meanwhile, DeFi research indicates nearly $285 million in direct debt exposure tied to various lending protocols, raising concerns about the systemic vulnerabilities within the decentralized finance ecosystem. Stream Finance had experienced issues related to over-leveraging, with borrowing significantly exceeding supporting assets. The fallout has also sparked discussions on the operational risks associated with DeFi, highlighting weaknesses beyond just smart contracts. In the wake of this crisis, the broader cryptocurrency market has also seen declines, particularly affecting Bitcoin, which dropped to levels not seen in months.

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