Hidden Leverage and External Party Risks Lead to XUSD Downfall
- Stream Finance's XUSD stablecoin collapsed to $0.30, freezing $160M in user funds after a $93M loss linked to an external fund manager. - The crisis followed a $100M exploit at Balancer Protocol, amplifying DeFi market anxiety and triggering rapid fund withdrawals. - Stream's high-leverage model and hidden $520M TVL vs. $160M actual deposits raised red flags about risky third-party fund usage. - XUSD's collapse exposed DeFi vulnerabilities, reigniting debates on third-party risks and urging audits for pr
The
This turmoil unfolded during a period of heightened instability in DeFi. Just two days earlier, Balancer Protocol experienced a $100 million security breach—one of the year’s most significant incidents,
Stream Finance’s downfall was largely attributed to its aggressive leverage strategy. The protocol invested user funds in repeated yield-generating tactics and had promoted returns as high as 12% through leveraged farming across 50 liquidity pools. However, inconsistencies between its stated total value locked (TVL) of $520 million and independent sources like DeFiLlama—which verified only $160 million in user deposits—sparked concerns about undisclosed leverage, according to
The repercussions went beyond Stream Finance. The collapse of XUSD set off a chain reaction, with
Stream Finance has committed to retrieving liquid assets and sharing regular updates, but users remain in limbo. Losses in DeFi have surpassed $3 billion so far this year—driven by events like the $8.4 million Bunni DEX hack—demonstrating the sector’s ongoing vulnerability, according to Coinotag. Although the platform stresses its commitment to transparency through legal investigations, investors are advised to favor protocols with thorough audits and transparent governance structures.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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