USDX Stablecoin Plunges 40% as Delta-Neutral Hedge Fails

USDX Loses Dollar Peg

Stable Labs’ USDX stablecoin fell sharply on Thursday, dropping below $0.60 later than losing its peg to the U.S. dollar. The token, which once had a circulating supply of about $683 million, is now trading at levels that have raised alarm among decentralized finance platforms exposed to it.

USDX is designed to maintain stability through delta-neutral hedging strategies on platforms, but the sudden slide has put those mechanisms in question. Protocols such as Lista DAO and PancakeSwap said they were monitoring the situation and moving to reduce exposure.

“We are aware and have been closely monitoring the MEVCapital USDT Vault and Re7Labs USD1 Vault, where collateral assets ($sUSDX and $USDX) continue facing abnormally high borrowing rates without repayment activity,” Lista DAO said on X.

PancakeSwap, which is backed by Binance, issued a similar statement: “Our team is also aware of the situation involving the affected vaults and is monitoring it closely. Please review and monitor your positions involving these vaults on PancakeSwap. We’ll continue to stay updated and share information as needed. Stay SAFU.”

Investor Takeaway

Market Reaction and Protocol Exposure

USDX is listed on BitMart, Uniswap and other decentralized platforms, according to CoinMarketCap. On Thursday, staked USDX fell to about $0.62 later than briefly spiking above $1.11, price data from The Block showed. The sharp volatility raised concerns of potential contagion across DeFi platforms where USDX serves as collateral.

Stable Labs has not issued a public statement on the depeg. The company describes itself as a MiCA-compliant issuer of stablecoins and tokenized assets. In 2024, it said it raised $45 million at a valuation of $275 million from NGC, BAI Capital, Generative Ventures and UOB Venture Management, with existing investors including Dragonfly Capital and Jeneration Capital.

Suspected Triggers and Onchain Activity

The cause of the depeg remains unclear, though market participants have linked the event to the $128 million Balancer exploit on Nov. 3. Some analysts said forced liquidations of Stable Labs’ hedged may have triggered mass redemptions, breaking the peg.

“Their portfolio hasn’t changed in over two months,” said Min, a researcher at digital asset manager Hyperithm. “Are they actually doing any active management? At one point, they even had weird alts like BANANA31 in the portfolio.”

Another trader using the handle Arabe ₿luechip on X alleged that a wallet linked to Flex Yang — founder of Stable Labs and Babel Finance — began using USDX collateral to swap into other stablecoins such as USDC, USDT and Trump-backed USD1 earlier this week on Euler, Lista and Silo. “It appears that all USDC / USD1 / USDT liquidity was drained by sUSDX / USDX as collateral in Euler / Lista / Silo, paying 100% borrow interest with viewmingly no intent to repay,” the trader wrote. “What’s the rationale for borrowing against USDX while burning 100% interest?”

Emergency Liquidations at Lista DAO

Lista DAO said it had voted to liquidate its USDX/USD1 vault in coordination with Re7 Labs, which assisted set up the vault. “This action aims to minimize potential losses and maintain healthy market conditions across the ecosystem,” Lista said. The protocol used a flash loan to liquidate more than 3.5 million USDX and recover about 2.9 million USD1.

Re7 Labs disclosed earlier this week that some of its vaults had exposure to Stream Finance’s xUSD stablecoin, which lost its own peg later than an exploit on Nov. 3. The overlap between these protocols has added to fears that liquidity stress could spread across smaller DeFi ecosystems tied to synthetic stablecoins.

Investor Takeaway

Stablecoin Risks Resurface

The depeg of USDX comes as regulators and investors renew scrutiny of algorithmic and synthetic stablecoins following earlier failures such as TerraUSD. While USDX differs in design — backed by delta-hedged collateral rather than algorithmic minting — its collapse below $0.60 shows that market-based hedges can fail under pressure.

For now, the lack of a response from Stable Labs has left uncertainty hanging over markets. platforms and DeFi protocols holding USDX are assessing their risk exposure, while traders watch whether the token can regain parity or spirals further. The episode adds to a growing list of stablecoin failures testing confidence in management frameworks.