Decentralized financial liquidity provider Elixir has pulled the plug on its USD stablecoin after Stream borrowed the token to stabilize its own stablecoin.
Summary
- Elixir stated that it would permanently shut down its USD stablecoin following the collapse of its main counterparty, Stream Finance, which owes the protocol $68 million following a $93 million asset loss.
- As part of the process, the platform has halted all USD and SDEUSD coins and redemptions in USDC. So far, as many as 80% of holders have already been repaid through redemptions.
On November 6, Elixir announced it would retire the stablecoin, stating that it “has no value and the stablecoin has since disappeared.” As a result, the platform promises to make offsets in USDC, which is available to all deUSD holders and its derivatives, including sdeUSD.
Users can claim compensation for holding the USD through the protocol websitewhich instructs holders and stakers of the token to connect their wallets if they want to claim USDC (USDC) offsets. Although it is currently unavailable to theUSD holders on Sui (SUI) and Sei (SEI), as well as certain automated market makers and liquidity providers.
According to facts from CoinGecko, the stablecoin has broken away from the US dollar and has lost almost 100% in value over the past 24 hours. The synthetic stablecoin now has a value of $0.026.
“the USD has no value and the stablecoin has disappeared. Do not buy or invest in the USD, not even through AMMs,” the protocol said.
To date, the company has provided compensation to approximately 80% of current deUSD holders. However, this number does not include the tokens held by Stream Finance. Under the protocol, Stream has approximately 90% of the remaining deUSD supply in circulation. There are currently more than 91.2 million deUSD in circulation.
As part of the process, the platform has shut down all infrastructure for creating and redeeming the token, as it plans to permanently retire the stablecoin “in the near future.”
“All affected LPs in AMM pools or credit markets will be able to claim the full value of their position,” Elixir said.
Launching in mid-2024, theUSD is a synthetic stablecoin fully backed by staking tokens such as stETH and sDAI. It is designed to compete with similar synthetic stablecoins in the space, such as USDe.
Why is Elixir destroying the USD?
Two days ago, Stream Finance suffered a loss of $93 million in net assets held within the Stream fund, according to the third-party asset fund manager. While the exact cause of the incident is still under investigation, DeFi Solution has enlisted the help of Keith Miller and Joseph Cutler of blockchain-focused law firm Perkins Coie LLP to address the situation.
Due to the incident, the platform has decided to temporarily suspend all withdrawals and deposits, while pending deposits will not be processed in the meantime.
In the aftermath, Stream is reportedly owed an estimated $285 million debt to various lenders in the space. This debt includes approximately $68 million to Elixir. Not only that, Stream also borrowed theUSD to stabilize the value of its own failing stablecoin Staked Stream USD or XUSD.
As of November 7, the value is XUSD decreased from $1 to $0.17.
According to Elixir’s statement, Stream Finance still owns approximately $75 million in the USD, while Elixir holds a similar portion of the remaining supply, backed by a Morpho loan to Stream.
The platform claimed that Stream has decided not to repay or close their existing credit positions, which represent more than 99% of the total credit positions in the chain. As a result, the platform will work with Euler, Morpho and Compound to distribute the Stream loan repayment in an effort to liquidate Stream’s positions.
“We still believe that this will be honored on a 1-to-1 basis,” Elixir said.
