What happened? Elixir halted support for deUSD after Stream Finance’s losses caused a massive depeg.
Elixir suspended deUSD and processed redemptions for about 80% of holders after Stream Finance’s $93 million loss pushed deUSD down to roughly $0.015. Stream had large leveraged exposure, reportedly owes around $68 million to Elixir and holds about 90% of deUSD, while its own XUSD plunged about 90%. At the same time, Balancer suffered a separate exploit that initially cost roughly $128 million, with about $19 million later recovered.
Who does this affect? Holders, counterparties, DeFi protocols and broader crypto investors face direct and indirect hits.
Directly affected are deUSD and XUSD holders who saw token values collapse and faced limited withdrawals while positions are sorted out. Protocols and lenders with exposure — including Elixir, Euler, Morpho, Compound and any liquidity providers tied to these tokens — risk losses and forced liquidations. More broadly, DeFi users and traders, especially on chains like Arbitrum where most trading happened, may see reduced liquidity and higher volatility.
Why does this matter? It raises contagion and confidence risks that can tighten liquidity and move markets.
The situation shows how leverage and concentrated holdings can trigger fast contagion across stablecoins and lending markets, leading to rapid price crashes and counterparty stress. Loss of confidence tends to make liquidity providers pull back and borrowing costs rise as participants deleverage, which can push more selling. Overall, shocks like this can lower risk appetite, prompt broader withdrawals across DeFi, and lead to closer regulatory and market scrutiny that affects prices and trading activity.