Decentralized finance liquidity provider Elixir has ceased support for its synthetic stablecoin, deUSD. This decision comes as a direct consequence of the significant $93 million loss incurred by Stream Finance earlier this week, which has had cascading effects throughout the DeFi ecosystem.
In an announcement made via X on Thursday, Elixir stated that it has successfully facilitated the redemption of 80% of all deUSD holders. This action has contributed to the stablecoin's depeg from the US dollar, with its value currently standing at 1.5 cents, according to data from CoinGecko.
Stream Finance had previously halted withdrawals on Tuesday. This move followed an disclosure from an external fund manager regarding a $93 million deficit in net assets. This deficit included an estimated $285 million in debt owed to various lenders, with approximately $68 million of that amount being owed to Elixir.
Stream Finance's Actions Create Ripple Effects
Stream had utilized deUSD as a means to stabilize its own synthetic stablecoin, Staked Stream USD (XUSD). However, following the protocol's revelation of its $93 million loss, XUSD experienced a significant devaluation, dropping to as low as $0.10.
Elixir's deUSD was launched in July 2024 with the ambitious goal of competing with Ethena Labs' USDe as a leading synthetic stablecoin. Prior to its depegging event, deUSD held a market capitalization of approximately $150 million.
Elixir Alleges Stream Finance Will Not Repay Debts
Elixir has highlighted that Stream Finance currently holds about 90% of the remaining deUSD supply, a sum valued at $75 million.
Despite this significant holding, Elixir claims that Stream Finance has opted not to repay its obligations or close these positions. This situation has compelled Elixir to collaborate with other decentralized lenders, including Euler, Morpho, and Compound, to ensure that deUSD holders receive full repayment.
We still believe this will be honored 1 for 1.
Elixir's decision to disable withdrawals was partly motivated by a desire to "remove any risk of Stream liquidating deUSD before repaying their loan." This measure aims to protect the integrity of the redemption process and prevent further instability.
Stream Finance did not immediately respond to a request for comment regarding these developments.