As the cryptocurrency market bleeds profusely, another stablecoin has "de-pegged."

Amid the already turbulent cryptocurrency market, another stablecoin has encountered a crisis of trust. The synthetic stablecoin USDX issued by Stable Labs severely deviated from its $1 peg on Thursday, raising concerns in the market about a potential chain reaction affecting related decentralized finance (DeFi) protocols.

As the price of USDX plummeted, several mainstream decentralized finance protocols quickly took action. The lending protocol Lista DAO and the Binance-supported decentralized exchange PancakeSwap both issued statements indicating that they are closely monitoring the situation. Among them, Lista DAO has initiated an emergency governance vote seeking authorization for the forced liquidation of related assets to control risk exposure.

Lista DAO pointed out that the borrowing rates of major borrowers associated with Stable Labs on its platform have surged, but no repayment activities have occurred. To address the crisis, the protocol executed a liquidation through a flash loan, recovering over 2.9 million USD1 tokens, in an attempt to dismantle this "time bomb" before the crisis spreads.

As of now, the issuer of USDX, Stable Labs, has not commented on the matter. According to The Block's price page, although the price of USDX briefly surged above $1.11, it has fallen to around $0.113 at the time of publication, with market panic still brewing.

Chain Reaction and Emergency Liquidation

The decoupling incident of USDX has triggered heightened alertness in the DeFi community, prompting related protocols to quickly activate emergency plans. Lista DAO initiated an emergency governance vote numbered LIP 022 on November 6, seeking community authorization for the forced liquidation of the USDX market involving MEV Capital and Re7 Labs' treasury management.

In fact, prior to initiating the vote, Lista DAO had executed a liquidation of over 3.5 million USDX through a flash loan, recovering over 2.9 million USD1 tokens.

The vote is conducted via the Snapshot platform and will conclude on November 9. At the time of publication, all veLISTA token holders participating in the vote expressed their support. Lista DAO stated that this move aims to "minimize potential losses and maintain a healthy market environment for the entire ecosystem."

Meanwhile, the decentralized exchange PancakeSwap also issued a reminder to users:

"Our team has also noticed the situation involving the affected treasury and is closely monitoring it. Please check and monitor your positions involving these treasuries on PancakeSwap."

Wall Street Insights has compiled the UTC timeline of the event on November 6:

9:23:

Lista DAO announced that it is monitoring the situation where borrowing rates in the USDT treasury of MEV Capital and the USD1 treasury of Re7 Labs have surged to 800%. The DAO pointed out that the main borrower (associated with Stables Labs) has not made any repayments, and the collateral assets used are $sUSDX and $USDX. Lista calls on the two institutional treasury managers to take responsibility and provide public explanations as soon as possible to protect user assets.

10:55:

Re7 Labs proposed a response plan in the Discord channel of Lista DAO, planning to initiate forced liquidation. Lista DAO stated that it has received the declaration and will soon initiate a governance vote to start the liquidation process.

11:08:

PancakeSwap stated that it is monitoring the event and advised users to check their positions in the relevant liquidity pools.

11:15:

Lista DAO, at the request of the treasury manager of Re7 Labs, officially initiated an emergency governance vote (LIP-022). The proposal content is to adjust the oracle price of USDX to trigger public liquidation of affected positions based on the scale of outstanding loans.

11:50:

MEV Capital acknowledged the abnormal increase in borrowing rates in its USDT/sUSDX market and took countermeasures, including setting the position limit to 0 and updating the interest rate model. The collateral involved has similar risks to the xUSD collateral assets involved in the previous $93 million loss of Stream Finance.

Follow-up:

The result of this emergency vote will determine whether Lista DAO will implement oracle price coverage and forced liquidation. The proposal clearly states: If abnormal liquidity is found in the USDX market during the voting period, the DAO may intervene early without waiting for the voting to conclude.

Behind the "de-pegging": Possible Triggers and Doubts

There is no consensus in the market regarding the specific reasons for USDX's de-pegging, but various speculations have emerged.

One possible explanation is that this incident may be related to a $128 million theft incident involving Balancer that occurred on November 3. This incident may have forced the liquidation of the Bitcoin and Ethereum short positions used by Stable Labs for hedging, leading to a surge in USDX redemption volume, ultimately causing its price to fall.

At the same time, on-chain activities have also raised more questions. A trader using the pseudonym Arabe ₿luechip stated on the X platform that a wallet associated with the founders of Stable Labs and Babel Finance, Flex Yang, began borrowing mainstream stablecoins such as USDC and USDT using USDX as collateral on protocols like Euler, Lista, and Silo earlier this week. ** Arabe ₿luechip wrote:

“All the USDC/USD1/USDT liquidity in the Euler, Lista, and Silo protocols seems to have been exhausted as collateral by sUSDX/USDX, with borrowers paying 100% borrowing interest but seemingly having no intention of repayment.”

Min, a researcher at the digital asset management company Hyperithm, also raised questions. He pointed out that the “portfolio of USDX has not changed for more than two months,” and questioned:

“Are they really doing any active management?”

Netizens have commented on this incident. User BitMania said on Twitter:

“I was still watching the market at midnight, USDX went to zero overnight, all efforts turned to ashes, this is the risk of decentralization.”

ChainBreaker stated:

“Smart contracts must not be lazy; this USDX incident is a bloody lesson.”

On Reddit, someone bluntly said, “Contract upgrades are no joke; too many people's assets have been destroyed.” Others claimed in a Telegram group, “We have already connected with three law firms and will initiate a joint lawsuit against the project party.”

Some also helplessly said:

“The blockchain dream has been cut down; can USDX promote stricter audits?”

The issuer has a prominent background but remains silent

Public information shows that the issuer of USDX, Stable Labs, claims to be “a stablecoin and tokenized asset issuer compliant with EU MiCA regulations.” The company announced in 2024 that it completed a $45 million financing round at a valuation of $275 million.

According to the press release at the time, this financing round was led by NGC, BAI Capital, Generative Ventures, and UOB Venture Management, with existing investors including well-known industry institutions such as Dragonfly Capital and Jeneration Capital. However, in the face of the severe decoupling crisis of its core product USDX, this company with a prominent investment background has yet to make any public response, and its silence has exacerbated market uncertainty