OKX founder Star Xu warns Ethena’s USDe isn’t a stablecoin after Binance depeg, urging exchanges to treat it as a tokenised hedge fund.
Ethena USDe is back in focus after last Friday’s flash crash rattled the crypto market. The synthetic-dollar token, issued by Ethena Labs, lost its peg on Binance and triggered one of the most violent liquidations in recent memory.
OKX founder Star Xu called the event a wake-up call.
He argued that treating Ethena USDe as a traditional stablecoin creates systemic risk for the entire crypto market. Instead, he said, it should be seen as a tokenised hedge fund that carries measurable risk.
Ethena USDe Not a Traditional Stablecoin
“It’s important to remind the market that USDe should not be viewed as a 1:1 pegged stablecoin,” Xu said. “It behaves like a structured investment vehicle.”
According to Xu, USDe’s structure is different from standard dollar-backed coins like USDT or USDC. Rather than holding cash or short-term debt, Ethena uses a delta-neutral strategy that combines crypto collateral with short futures positions.
It’s an objective analysis.
First of all, Ethena Labs has done an impressive job in both portfolio and risk management — their transparency should be an example in the industry. OKX already lists the ENA token and may consider supporting USDe in the future as well. In fact, OKX… https://t.co/r6cOfmzFJa
— Star (@star_okx) October 13, 2025
This setup aims to keep price volatility low, but it still depends on funding rates and futures liquidity. During sharp market stress, those factors can change quickly and cause short-term losses.
“Calling Ethena USDe a stablecoin misleads traders,” Xu explained. “Its model relies on derivatives exposure, which means it can face liquidation risks under extreme conditions.”
Ethena Labs markets USDe as a “synthetic dollar,” but Xu’s comments show the need for accurate classification. Treating it like a stablecoin when it is not could expose platforms to liquidity crunches if the same thing ever happens again.
The Flash Crash and Binance’s De-Peg
The October 10/11 sell-off started after US President Donald Trump announced a 100% tariff on Chinese imports. The news caused a flight from risk assets and erased over $20 billion in crypto open interest in a matter of hours.
During the chaos, USDe fell as low as $0.65 on Binance, even though it traded closer to parity elsewhere. The sharp drop wiped out over $2 billion in market cap and reduced its value from $14.8 billion to $12.6 billion in just two days.
Binance later confirmed that thin order books and technical glitches made it difficult for market makers to step in. The exchange repaid roughly $283 million to affected traders after the event.
Other exchanges like Bybit and Curve saw far gentler volatility. Bybit’s USDe price briefly touched $0.95 before recovering, while Curve dipped by only 0.3%.
Lessons for Traders and Exchanges
The episode left deep scars for leveraged traders. Nearly $19 billion in positions were liquidated, marking the largest wipeout since the FTX collapse. Thin liquidity on Binance and delayed access for market makers made things worse.
Dragonfly partner Haseeb Qureshi described it vividly:
“It’s like a fire broke out, but the roads were blocked and firefighters couldn’t reach the site.”
Did Ethena Really Depeg?
I’ve seen a lot of chatter about the Ethena depeg during the market mayhem this weekend. The story is that USDe briefly depegged to ~68c before recovering. Here’s the Binance chart everyone is quoting:
But digging into the data and talking to a bunch of… https://t.co/ln0fEeVc5E pic.twitter.com/lQuZrQbL7f
— Haseeb ＞|＜ (@hosseeb) October 12, 2025
Xu reiterated he need for caution. He said exchanges that accept Ethena USDe as collateral must apply risk controls. Treating it like a regular stablecoin, he warned, could spread localised failures to the wider market.
