Why did USDe survive while LUNA dropped to zero, despite both being stablecoins?

Author: MSX Research Institute

The decoupling event in October 2025 intersects with Hayek's prophecy

On October 11, 2025, panic in the crypto market triggered an extreme shock to the synthetic stablecoin USDe — during an "epic crash" where Bitcoin plummeted from $117,000 to $105,900 (a daily drop of 13.2%) and Ethereum saw a single-day drop of 16%, USDe briefly fell to about $0.65 during the trading session on 2025-10-11 (down about 34% compared to the price of $1 ), and then recovered within a few hours. During the same period, the global crypto market saw a 24-hour liquidation amount soar to $19.358 billion, with 1.66 million traders forced to liquidate, setting a record for the largest single-day liquidation in history.

From the perspective of micro market performance, the liquidity pool depth of USDe-USDT on the decentralized exchange Uniswap was only 3.2 million USD during the peak of the event, a decrease of 89% compared to before the event. This led to a 25% discount on a sell order of 100,000 USDe due to slippage (the order was placed at 0.7 USD, but the actual transaction price was 0.62 USD); at the same time, six major market makers faced a liquidation risk with a 40% decrease in margin value as they used USDe as cross-margin, further exacerbating the market liquidity black hole.

However, this "crisis" saw a key reversal within 24 hours: the price of USDe gradually rose back to $0.98, and the third-party reserve proof disclosed by Ethena Labs showed that its collateralization ratio remained above 120%, with an over-collateralization scale of $66 million; more critically, the user redemption function remained normal at all times, and assets such as ETH and BTC in the collateral could be redeemed at any time, which became the core support for restoring market confidence.

The MaiTong MSX Research Institute believes that this "plunge - recovery" curve sharply contrasts with the complete zeroing out that followed the LUNA-UST decoupling in 2022, and this event surpasses the ordinary "stablecoin volatility" realm — it has become the first extreme stress test of Hayek's theory of "The Denationalization of Money" in the digital age.

In 1976, Hayek proposed in "The Denationalization of Money" that "money, like other goods, is best provided by private issuers through competition, rather than being monopolized by the government." He believed that the government's monopoly on money issuance "is the source of all the evils of the monetary system," and the biggest problem with the monopoly mechanism is that it hinders the process of discovering better forms of money. Within the competitive framework he envisioned, privately issued money must maintain stable purchasing power, otherwise it will be eliminated from the market due to a loss of public trust; therefore, competitive money issuers "have a strong incentive to limit their quantity or lose their business."

Half a century later, the emergence of USDe embodies the contemporary expression of this idea. It does not rely on sovereign fiat currency reserves, but rather supports its value through consensus assets in the crypto market, maintaining stability through derivatives hedging. Its credibility and circulation completely depend on market choice and technological transparency. Regardless of the outcome of the decoupling and recovery in October 2025, the practice of this mechanism can be seen as a real-world experiment of Hayek's "competitive discovery of quality currency"—confirming the potential self-regulating power of the market in monetary stability, while also revealing the institutional resilience and evolutionary direction of digital private currencies in complex environments.

The mechanism innovation of ### USDe

The "Collateral - Hedging - Yield" trinity framework of USDe permeates the logic of market self-regulation in every aspect, rather than the coercive constraints of centralized design. This is highly consistent with Hayek's emphasis that "market order arises from individual spontaneous actions."

Collateral System: The Value Foundation for Building Market Consensus

The collateral options for USDe fully adhere to the liquidity consensus of the cryptocurrency market—ETH and BTC together account for over 60%. These two assets are not designated by any institution, but have been recognized by global investors as "hard assets of the digital world" over more than a decade of trading. The auxiliary liquid staking derivatives (such as WBETH and BNSOL) are also products that the market has spontaneously generated to enhance capital efficiency, allowing for the retention of staking rewards without sacrificing liquidity; meanwhile, the 10% share of USDT/USDC serves as the market's "transitional stable tool," providing a buffer for USDe in extreme market conditions.

The entire collateral system always maintains an excess state, with the collateralization rate still exceeding 120% at the time of the incident in October 2025, and real-time valuation and automatic liquidation by smart contracts.

Stabilization Mechanism: Spontaneous Hedging in the Derivatives Market

The core difference between USDe and traditional fiat-backed stablecoins lies in its reliance on "fiat reserves backed by national credit." Instead, it achieves risk hedging through short positions in the derivatives market. The essence of this design is to leverage the liquidity of the global crypto derivatives market to allow the market itself to absorb price fluctuations—when the price of ETH rises, the profits from spot assets offset short losses; when the price of ETH falls, the profits from shorts make up for spot losses, all without any intervention from centralized institutions and driven entirely by market price signals.

In October 2025, when ETH plummeted by 16%, this hedging mechanism experienced a brief lag due to instantaneous liquidity depletion, but it did not fail — the short positions held by Ethena Labs ultimately resulted in a floating profit of 120 million dollars, and these profits did not come from administrative subsidies, but from voluntary trading between long and short parties in the derivatives market.

Earnings Mechanism: Spontaneous Incentives to Attract Market Participants

The USDe designed "Staking Yield + Circular Lending" model is not the "rigid repayment of high interest" found in traditional finance, but a reasonable compensation for market participants taking on risk. The basic 12% annualized subsidy comes from the spontaneous investment of ecological funds in "increasing currency circulation"; while the mechanism of circular lending amplifying leverage to 3-6 times, with annualized returns reaching 40%-50%, essentially allows users to autonomously choose the matching of risk and return — users willing to take on higher leverage risks can earn higher returns; users with lower risk tolerance can opt for basic staking.

Comparison of Three Types of Stablecoin Mechanisms: The Distinction Between Market Choice and Administrative Intervention

The Truth of Market Testing: How USDe Can Distinguish Itself from LUNA-UST

The de-pegging event in October 2025 is often misunderstood as a "similar risk exposure" between USDe and LUNA-UST, but from the perspective of the Austrian School, the essential differences between the two were thoroughly highlighted in this test— the recovery of USDe is a success of "non-state currency undergoing market testing," while the collapse of LUNA-UST is the inevitable outcome of "pseudo-innovation detached from real assets."

The Essential Differences of Value Anchors: Real Assets vs Illusory Expectations

The value anchor of USDe is real assets that can be redeemed at any time, such as ETH and BTC. Even in extreme market conditions, users can still obtain equivalent crypto assets through the redemption mechanism. During the decoupling period in October 2025, the redemption function of USDe operated normally, and third-party reserve proof showed an over-collateralization of 66 million dollars. This "redeemable value commitment" is the foundation of market confidence.

The LUNA-UST has no real assets backing it, and its value relies entirely on "users' expectations of the LUNA price." When market panic erupts, the UST redemption mechanism needs to issue more LUNA to function, and the infinite issuance of LUNA eventually loses its value, leading to the collapse of the entire system. This "currency without asset backing" has violated Hayek's principle that "currency must have a real value basis" since its inception, and a collapse is an inevitable result.

The Logical Differences in Crisis Response: Market Self-Repair vs Administrative Intervention Failure

USDe's response after decoupling fully follows market logic: Ethena Labs did not issue "administrative rescue plans," but instead conveyed signals of "mechanism transparency and asset safety" to the market through public reserve proofs, optimizing collateral structure (reducing the proportion of liquid staking derivatives from 25% to 15%), and restricting leverage ratios, ultimately relying on users' spontaneous trust to achieve price recovery.

The response of LUNA-UST during the crisis is a typical case of "failure of administrative intervention": the Luna Foundation Guard attempted to save the market by selling Bitcoin reserves, but this centralized operation could not counteract the spontaneous sell-off in the market — Bitcoin itself also experienced a decline in extreme market conditions, and the reserve assets were highly correlated with the risks of UST, ultimately leading to the failure of the market rescue.

Differences in Long-term Viability: Market Adaptability vs Mechanism Fragility

After the decoupling, USDe not only restored its price but also enhanced its long-term adaptability through mechanism optimization: limiting the circular borrowing leverage to 2 times, introducing compliant government bond assets (USDtb) to improve collateral stability, and diversifying hedge positions across exchanges – these adjustments are not from administrative orders, but rather a spontaneous response to market feedback, making the mechanism more aligned with the market principle of "risk and return matching."

LUNA-UST lacked market adaptability from the very beginning: its core Anchor protocol with a 20% high interest rate relied on continuous subsidies from ecological funds rather than real payment demand (the real payment scenario for UST accounts for less than 5%). When the subsidies could not be sustained, the funding chain broke, and the entire system collapsed instantly. This model of "relying on unsustainable administrative subsidies" is destined to fail to survive in market competition.

Mechanism Flaws and Critical Reflection: The Growth Dilemma of Non-State Currencies

The innovative value of USDe is undeniable, but during the stress test in October 2025 and its daily operations, its mechanism design still deviates from Hayek's idea of "complete market spontaneous adjustment," exposing risks that need to be heeded. These flaws are not essential defects that cannot be corrected, but rather obstacles that must be overcome for its evolution into a mature non-state currency.

Concentration Risk of Collateral: Systemic Binding of Cryptocurrency Asset Cycles

Over 60% of USDe collateral is concentrated in ETH and BTC. While this aligns with the current liquidity consensus in the crypto market, it falls into the dilemma of "binding to a single market cycle." The decoupling in October 2025 is essentially a chain reaction triggered by a one-sided decline in the crypto market—when ETH plummets by 16% in a single day, even with derivatives hedging, the instantaneous shrinkage in the market value of collateral still triggers market panic.

What is even more concerning is that the liquid staking derivatives (such as WBETH) within the current auxiliary collateral have not yet detached from the Ethereum ecosystem; they are essentially "secondary derivatives of crypto assets," failing to achieve true risk diversification. This collateral structure of "internal circulation of crypto assets" appears weak compared to the logic of traditional currencies relying on the value of the real economy.

Limitations of Hedging Mechanism: Implicit Dependence on Centralized Exchanges

The derivatives hedging of USDe highly relies on the liquidity of leading centralized exchanges. The brief lag in the hedging mechanism in October 2025 was precisely due to the liquidity gap caused by a major exchange suspending perpetual contract trading. Currently, about 70% of USDe's short positions are concentrated in two exchanges, and this concentration makes it difficult to completely escape the passive acceptance of the rules of centralized platforms.

Moreover, the drastic fluctuations in funding rates have exposed the singularity of hedging tools. USDe currently relies solely on perpetual contracts for risk hedging, lacking a diversified combination of tools such as options and futures, which makes it difficult to quickly adjust hedging strategies when the bullish and bearish forces are extremely imbalanced. This reflects that its mechanism design still has not fully utilized the market's diverse risk pricing capabilities.

RWA Anchor Upgrade: The Advanced Path of Non-Nationalized Currencies

In the face of existing mechanism flaws, integrating assets such as gold tokens and US stock tokens into the RWA asset optimization anchoring system is not only a precise correction to the deficiencies of USDe but also an inevitable choice in line with the explosive growth trend of the RWA market (which is expected to reach $26.4 billion in 2025, with an annual growth rate of 113%). This upgrade does not deviate from the core of denationalization; rather, it enhances the vitality of Hayek's ideas in the digital age by connecting with the value of the real economy.

Underlying Logic of RWA Pegging

The value of currency should stem from real assets that have broad market consensus, and RWA assets precisely possess this attribute — gold, as a hard currency for thousands of years, has a value consensus that transcends countries and eras; US stock tokens correspond to the economic returns of listed companies, anchoring the ability of enterprises to create value; sovereign bond tokens rely on the tax capacity of sovereign countries, providing a low-volatility value benchmark. The value of these assets does not depend on the cycles of the crypto market, but comes from production and trading in the real world, which can build a "cross-market value buffer" for USDe.

In 2024, the BUIDL token launched by BlackRock (anchored to assets such as U.S. Treasury bonds) has verified the feasibility of RWA anchoring. The core difference between BUIDL and USDe lies in the fact that BUIDL relies on centralized institutions for issuance, while USDe enables the decentralized certification and valuation of RWA assets through smart contracts, truly embodying the logic of "market self-management."

Adaptation and Allocation Strategies for Diversified RWA Assets

The RWA anchoring upgrade of USDe should follow the principle of "market consensus priority and risk diversification adaptation." Based on the current maturity of RWA tokenization, a "core - auxiliary - elastic" three-tier configuration system can be constructed, as shown in the table below:

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This configuration can reduce the collateralization ratio of USDe's crypto assets from the current 80% to 40%-50%, preserving the liquidity advantages of the crypto market while achieving cross-market risk diversification through RWA assets. Taking gold tokens as an example, their price correlation with ETH is only 0.2, which can serve as a "value anchor" during downturns in the crypto market, avoiding the panic of concentrated sell-offs in October 2025.

) The Austrian School's Reinsight: The Evolutionary Logic from Innovation to Maturity

The flaws of USDe and the upgrade path of RWA further confirm the deep meaning of Hayek's "Denationalization of Money": denationalized currency is not a static mechanism design, but a dynamic market evolution process. Only through continuous self-correction and innovation can it succeed in currency competition.

The Evolution of Value Foundations: From Single Market Consensus to Cross-Domain Value Anchoring

USDe's current crypto asset collateral represents the "primary form" of non-national currency in the digital age—its value consensus is limited to participants in the crypto market. By integrating RWA assets, it essentially expands the value consensus to traditional finance and the real economy, upgrading the value foundation of USDe from "digital consensus" to "cross-domain real value." This evolution perfectly aligns with Hayek's assertion that "the value of money should derive from the broadest market trust." When USDe anchors multiple assets such as crypto assets, gold, and US stocks, its ability to resist risks from any single market will be significantly enhanced, truly becoming a "value carrier that transcends sovereignty and single markets."

Improvement of the Adjustment Mechanism: From Single Tools to Multidimensional Market Coordination

The current hedging mechanism of USDe relies on a single derivative market, which reflects the "underutilization of market tools." Hayek emphasized that "market self-repair" should be based on the collaboration of diverse markets — the integration of RWA assets not only enriches collateral but also creates the possibility of "crypto derivatives market + traditional financial market" for coordinated hedging. For example, the volatility of tokenized US stocks can be hedged through traditional stock options, while gold tokens can be matched with forward contracts in the London gold market. This cross-market collaboration makes the hedging mechanism more resilient and avoids dependence on the liquidity of a single market.

Conclusion: The leap from innovation benchmark to evolution model.

The market test in October 2025 not only validated the value of USDe as a benchmark for non-national currency innovation but also revealed the inevitable path of its evolution from "primary innovation" to "mature currency." The essential distinction from LUNA-UST lies in the support of real value and market adjustment capability; while its current systemic flaws are the unavoidable costs of growth in the innovation process.

The MacTong MSX Research Institute believes that the upgrade strategy incorporating RWA assets such as gold tokens and US stock tokens provides a clear evolutionary direction for USDe — this is not a denial of existing innovations, but a deepening and improvement guided by Hayek's principles.

For market participants, the evolution of USDe brings deeper insights: the core competitiveness of non-sovereign currencies lies not only in the courage to break the sovereign monopoly but also in the ability to continuously self-correct; the standard for judging its value is not only short-term stability performance but also long-term resilience in connecting with real value and adapting to market evolution. When USDe completes the RWA upgrade, it will no longer just be an innovative experiment in the crypto market, but a "cross-domain value carrier" with the potential to challenge traditional currency systems.