Stream Finance Investigates $93M Loss Amid XUSD Stablecoin Depeg to $0.50

• Stream Finance $93 million loss stems from an external fund manager’s discovery of missing assets.

• The DeFi platform has temporarily halted all deposits and withdrawals to address the issue.

• XUSD stablecoin value dropped to $0.51, per CoinGecko data, amid user concerns over paused operations.

Stream Finance $93 million loss shocks DeFi: Paused operations, XUSD depegs to $0.50. Investigate risks in yield strategies. Stay informed on crypto developments for secure investing.

What is the Stream Finance $93 Million Loss?

Stream Finance $93 million loss refers to a significant asset shortfall discovered by an external fund manager overseeing the DeFi platform’s funds. The incident prompted the team to pause deposits and withdrawals on the platform, which focuses on recursive looping yield strategies. As of Monday, Stream Finance announced the hiring of lawyers from Perkins Coie to probe the matter thoroughly.

Stream Finance is investigating a $93 million loss and has paused deposits and withdrawals, which has caused its stablecoin to depeg to $0.50.

Decentralized finance platform Stream Finance has paused deposits and withdrawals after an external fund manager overseeing its funds identified a $93 million loss in assets. The team shared this update via an X post on Monday, noting the loss was reported on Sunday. They have engaged legal experts from Perkins Coie to conduct a detailed investigation into the discrepancy.

“We are actively withdrawing all liquid assets and expect this process to be completed in the near term,” the team stated. “We will provide periodic updates as additional information becomes available.”

Source: Stream Finance

During the ongoing investigation, Stream Finance has suspended withdrawals and will not process any pending deposits, aiming to stabilize operations and protect user funds.

How Has the Stream Finance Loss Impacted Its Stablecoin XUSD?

The Stream Finance $93 million loss has directly triggered a depegging event for its collateralized stablecoin, Staked Stream USD (XUSD), which fell to as low as $0.51 according to CoinGecko price tracking. Prior to the official announcement, users noticed delays in deposits and withdrawals, sparking concerns that accelerated the sell-off. This drop highlights vulnerabilities in yield-focused DeFi protocols using recursive looping mechanisms.

Stream Finance operates as a DeFi platform emphasizing recursive looping for yield generation, where assets are repeatedly deployed into strategies to maximize returns. XUSD serves as collateral for these activities, maintaining a peg to the U.S. dollar under normal conditions. However, the asset shortfall disrupted this balance, causing the stablecoin to trade at roughly half its intended value within 24 hours.

Omer Goldberg, founder of Labs, observed on X about 10 hours before Stream Finance’s update that XUSD had begun depegging below its target range, potentially linked to broader market pressures including an exploit on the Balancer automated market maker exceeding $100 million. Data from CoinGecko confirms the price trajectory, showing a sharp decline from near $1 to $0.51 amid heightened trading volume.

XUSD’s price over the last 24 hours. Source: CoinGecko

Earlier on Friday, Stream Finance addressed community queries regarding inconsistencies in its total value locked (TVL) figures. The platform’s website reported ~$160 million in user deposits versus ~$520 million in total assets deployed across strategies, differing from DefiLlama’s listings. “DefiLlama has decided that recursive looping is not TVL per their own definitions. We disagree with this, but to be transparent to users the website now makes a distinction,” the team explained.

Minal Thurkal, head of DeFi Ecosystem Growth at CoinDCX, commented, “This underscores the critical importance of understanding exactly how protocols generate yield and the significant risks involved in complex DeFi strategies, especially those that disagree with standard metrics like DefiLlama’s TVL.” Such insights from industry experts emphasize the need for clearer transparency in DeFi operations to mitigate similar risks.

Frequently Asked Questions

What Caused the Stream Finance $93 Million Loss?

The Stream Finance $93 million loss was identified by an external fund manager reviewing the platform’s assets, reported on Sunday. Details remain under investigation by Perkins Coie lawyers, with the team focusing on withdrawing liquid assets to assess the full extent and prevent further issues.

Why Did Stream Finance Pause Deposits and Withdrawals?

Stream Finance paused deposits and withdrawals to safeguard user funds during the investigation into the $93 million asset loss. This measure allows the platform to process liquid asset withdrawals without additional inflows, ensuring stability as updates are shared with the community on a regular basis.

Key Takeaways

• Immediate Response to Loss: Stream Finance acted swiftly by pausing operations and hiring Perkins Coie for a thorough probe, demonstrating proactive risk management in DeFi.
• Impact on XUSD Stablecoin: The depegging to $0.51 reflects broader vulnerabilities in collateralized assets tied to complex yield strategies, as tracked by CoinGecko.
• Transparency in TVL Reporting: Discrepancies with DefiLlama highlight the need for users to verify protocol metrics independently before engaging in recursive looping activities.

Conclusion

The Stream Finance $93 million loss and subsequent XUSD depegging serve as a stark reminder of the inherent risks in advanced DeFi yield strategies like recursive looping. As the platform collaborates with Perkins Coie to uncover details and restore operations, the incident underscores the importance of robust auditing and transparent TVL reporting in the evolving crypto landscape. Investors should prioritize due diligence and monitor updates closely to navigate these challenges effectively in the coming months.