Elixir, a decentralized finance (DeFi) liquidity provider, announced it is sunsetting its synthetic stablecoin deUSD in response to severe fallout from Stream Finance’s $93 million loss.
Stream, a DeFi yield aggregator, halted withdrawals on November 4 after an external fund manager disclosed the massive shortfall, revealing $285 million in total debt across lenders—including $68 million owed to Elixir.
This exposure triggered a cascade: deUSD’s peg to the USD collapsed to as low as $0.015, wiping out nearly all its value. Elixir has emphasized that while the token is now worthless, it remains committed to redeeming holders 1:1 in USDC.
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deUSD launches as a synthetic stablecoin challenging Ethena’s USDe, backed by over-collateralized loans across DeFi protocols. Community analysis reveals recursive minting loops between Stream’s xUSD and Elixir’s deUSD, inflating TVL through circular lending (e.g., Stream mints deUSD, uses it as collateral to borrow USDC, and loops back to mint more xUSD).
FUD builds as Stream fails to provide proof-of-reserves for xUSD; users urged to withdraw from related vaults. Stream halts withdrawals after $93M loss disclosure; its staked stablecoin xUSD depegs to $0.10 amid $285M debt revelation.
Stream holds 90% of deUSD supply ($75M), borrowed to back xUSD. Stream wallets dump deUSD on Curve pools, causing price to crash from $1 to $0.40, then $0.03. Elixir processes 80% of redemptions (excluding Stream), disables mint/redeem functions, takes a holder snapshot, and announces sunset. deUSD trades at $0.026.
Claims portal launches for remaining holders; Elixir coordinates with Euler, Morpho, and Compound to liquidate Stream positions and recover funds. Elixir lent ~65% of deUSD’s backing ($68M USDC) to Stream via Morpho markets for higher yields, taking xUSD as collateral.
When xUSD depegged 77% due to Stream’s loss, deUSD’s backing “vanished,” exposing systemic risks in synthetic stablecoins. Stream controls 99% of deUSD lending positions but declined to close or repay them, freezing liquidity. Elixir disabled withdrawals to prevent Stream from liquidating deUSD holdings prematurely.
Market Panic: Thin liquidity on DEXs like Curve amplified the dump—over $30M in deUSD was sold on-chain in hours, leading to the near-total depeg. This highlights vulnerabilities in recursive leverage loops, where protocols like Stream and Elixir mutually inflate TVL (e.g., $60M growth in weeks via circular minting), but a single failure unravels the system.
Elixir’s Response and User Impact Redemptions
80% of non-Stream holders already redeemed 1:1 in USDC. A snapshot secures the rest; a claims portal live as of November 7 allows remaining deUSD/sdeUSD holders to claim full value. Elixir states: “deUSD holds no value and the stablecoin has been sunset. Please do not buy or invest in deUSD.”
Elixir is withdrawing liquid assets and collaborating with Euler, Morpho, Compound, and vault curators to unwind Stream’s positions. It claims seniority on the $68M loan and expects full honoring of obligations.
Primarily deUSD holders now worthless on secondary markets and lenders to Stream via Morpho/Euler potential losses if recoveries fall short. No direct impact on USDC holders, but it erodes trust in synthetic stables.
Implications for DeFi
This event underscores the fragility of uncollateralized synthetics and leveraged lending: interlinked exposures can propagate failures rapidly, as seen in past cascades like the October 2025 liquidation wipeouts. While Elixir prioritizes user protection, the $93M Stream loss and $128M Balancer exploit recovery signals ongoing risks—analysts warn of eroding confidence in yield-chasing protocols.