On October 11, 2025, the cryptocurrency market faced a significant turmoil as panic set in, resulting in a severe shock to the synthetic stablecoin USDe. During this period, Bitcoin experienced a dramatic decline, dropping from $117,000 to $105,900—a staggering 13.2% plunge in just one day—while Ethereum also fell by 16%. As trading unfolded, USDe’s value briefly dipped to around $0.65, marking a 34% decrease from its peg of $1. However, the coin managed to recover within a few hours. This unsettling day saw global liquidations in the crypto market surge to an unprecedented $19.358 billion, forcing approximately 1.66 million traders to close their positions, setting a record for the largest single-day liquidation event ever recorded. From a micro-market perspective, the USDe-USDT liquidity pool on the decentralized exchange Uniswap shrank drastically to just $3.2 million, an 89% decrease from its pre-crisis level. Consequently, a sell order for 100,000 USDe incurred a slippage of 25%, with the pending order priced at $0.70 and the actual execution happening at $0.62. Meanwhile, six major market makers faced liquidation risks due to a 40% drop in margin value, exacerbating the liquidity crisis.
Remarkably, within 24 hours, the situation took a positive turn as USDe’s price gradually climbed back to $0.98. Reports from Ethena Labs, which provided third-party reserve certificates, confirmed that its collateral ratio remained above 120%, demonstrating over-collateralization of $66 million. Significantly, the user redemption function operated normally throughout the crisis, allowing users to cash out assets like ETH and BTC at any moment. This operational stability played a crucial role in restoring market confidence. The Maitong MSX Research Institute contends that this swift “plunge-recovery” trajectory starkly contrasts with the LUNA-UST collapse, which returned to zero following its decoupling in 2022. This event represents a critical stress test of Hayek’s “Denationalization of Money” theory in the digital context.
Theoretical Background of Monetary Denationalization
In his 1976 work “The Denationalization of Money,” economist Friedrich Hayek argued that money is best provided by private entities through competition rather than being controlled by a government monopoly. He asserted that such monopolies are the root cause of numerous monetary system problems, inhibiting the discovery of superior currency forms. According to Hayek, currency issuers must maintain stable purchasing power to avoid being eliminated from the market, as public trust is essential for their survival. Fast forward fifty years, and the emergence of USDe illustrates this philosophy in action. Unlike traditional fiat currencies backed by government reserves, USDe derives its value from consensus assets within the crypto market, ensuring stability through derivative hedging. Its credibility hinges on market selection and transparency, marking it as a real-world manifestation of Hayek’s vision for competitive currency issuance. Regardless of the outcome of the October 2025 decoupling and subsequent recovery, this incident serves as an experimental validation of market-driven monetary stability and highlights the evolutionary potential of digital private currencies.
USDe’s Innovative Mechanism
The “collateral-hedge-return” tripartite structure of USDe is characterized by self-regulatory market logic at every level, contrasting with the imposed constraints typical of centralized systems. The collateral system underpins the market consensus, with over 60% of its backing derived from ETH and BTC—assets recognized as “hard assets of the digital realm” by global investors over the past decade. Additionally, liquidity staking derivatives such as WBETH and BNSOL have emerged organically to enhance capital efficiency, allowing for staking returns without sacrificing liquidity. USDT and USDC contribute around 10% as transitional stabilization tools, acting as buffers during extreme market fluctuations. Importantly, the entire collateral system consistently maintains an excess state; even during the October 2025 event, the collateral ratio remained above 120% and was actively monitored and liquidated in real-time via smart contracts.
Stabilization Mechanism: A Unique Approach
USDe distinguishes itself from traditional fiat-collateralized stablecoins by not depending on fiat reserves but rather by managing risks through short positions in the derivatives market. This design capitalizes on the liquidity available in the global crypto derivatives landscape, enabling the market to accommodate price variations. When ETH’s price increases, the profits from spot assets mitigate losses from short positions; conversely, when ETH decreases, gains from short positions counterbalance losses in spot assets. This entire process operates exclusively based on market price signals, devoid of any centralized institutional intervention. Although the hedging mechanism faced a temporary delay during the October 2025 price drop, it ultimately proved effective, with Ethena Labs realizing $120 million in unrealized profits from its short positions. These profits emerged from voluntary transactions between participants in the derivatives market, not from any administrative support.
Revenue Mechanism: Encouraging Market Engagement
USDe employs a “staking income + revolving lending” model that deviates from traditional finance’s rigid redemption mechanisms offering high interest. Instead, it provides reasonable compensation for the risks taken by market participants. The foundational 12% annualized subsidy stems from voluntary ecosystem investments aimed at enhancing currency circulation. Users can leverage up to 3-6 times through revolving lending, yielding annualized returns of 40%-50%. This model allows participants to tailor their risk-reward balance according to their preferences, where those willing to take on higher leverage risks can reap greater rewards, while conservative investors can simply engage in basic staking.
Contrasting Stablecoin Mechanisms: Market-Driven vs. Administrative Control
The October 2025 unpegging event has often been misinterpreted as exposing USDe to similar risks as LUNA-UST. However, from the Austrian School perspective, this event highlighted fundamental distinctions between the two. USDe’s recovery demonstrated the success of a “non-nationalized currency” passing the market test, while LUNA-UST’s collapse was an inevitable outcome of a “pseudo-innovation” disconnected from tangible assets.
Value Anchors: Real Assets vs. Speculative Expectations
The intrinsic value of USDe is anchored by tangible assets like ETH and BTC, which can be redeemed at any time. Even during severe market fluctuations, users retain the ability to exchange USDe for equivalent crypto assets. Throughout the depegging episode in October 2025, USDe’s redemption mechanism functioned smoothly, and third-party reserve validations indicated over-collateralization of $66 million. This commitment to redeemable value serves as the cornerstone of market trust. In contrast, LUNA-UST lacks any genuine asset backing; its value relies solely on user expectations regarding LUNA’s price. During market panic, UST’s redemption depended on the issuance of additional LUNA, leading to a catastrophic loss of value and ultimately resulting in systemic failure. This “asset-free currency” fundamentally contradicts Hayek’s principle that “money must have a real value basis,” making its collapse unavoidable.
Crisis Management: Market-Driven Recovery vs. Centralized Intervention
USDe’s post-depegging response adhered to market principles: Ethena Labs refrained from implementing an “administrative rescue plan” and instead reassured the market with public reserve proofs, optimizing collateral structures, and limiting leverage ratios. This approach relied on market trust for price recovery. Conversely, LUNA-UST’s crisis management illustrated the pitfalls of centralized intervention; the Luna Foundation Guard’s attempt to salvage the situation by liquidating Bitcoin reserves proved ineffective as it could not counteract the market’s natural sell-off. Bitcoin’s own decline during this tumultuous period exacerbated the situation, leading to failure.
Long-Term Viability: Market Resilience vs. Institutional Fragility
Following its depegging, USDe not only restored its value but also enhanced its long-term adaptability through mechanism improvements. These included lowering leverage limits on lending, introducing compliant treasury bond assets for collateral stability, and diversifying hedging positions across exchanges. Such modifications arose from market feedback rather than top-down directives, aligning the mechanism with market principles of risk and return. In contrast, LUNA-UST’s core Anchor protocol depended on unsustainable subsidies, with overreliance on high-interest rates. When funding became untenable, the system collapsed rapidly as it lacked genuine market adaptability.
Mechanism Challenges and Critical Analysis: The Growth Challenges of Non-Nationalized Currency
While USDe’s innovative attributes are apparent, its operational mechanics revealed vulnerabilities during the October 2025 stress test, necessitating careful attention. These challenges are not insurmountable flaws but represent hurdles to overcome as USDe evolves into a mature non-nationalized currency.
Collateral Concentration Risk: Vulnerabilities Linked to Crypto Market Cycles
Over 60% of USDe’s collateral is tied to ETH and BTC, which, while aligned with current market liquidity consensus, exposes it to the risk of being overly reliant on a singular market cycle. The depegging incident in October 2025 was a chain reaction ignited by a significant drop in the crypto market. Despite having derivative hedging in place, the sudden decline in collateral value prompted widespread panic. Additionally, the existing liquidity-collateralized derivatives remain confined within the Ethereum ecosystem, functioning as “secondary derivatives” that fail to achieve true risk diversification. This embedded structure within crypto assets appears fragile when compared to traditional currencies grounded in the real economy.
Hedging Mechanism Limitations: Implicit Reliance on Centralized Exchanges
USDe’s derivatives hedging strategy is heavily reliant on the liquidity of major centralized exchanges. The temporary disruption in the hedging mechanism during October 2025 was attributed to a liquidity shortfall caused by the suspension of perpetual swap trading on a leading exchange. Currently, around 70% of USDe’s short positions are concentrated on just two exchanges, making it challenging to fully extricate itself from the influence of centralized platform rules. Moreover, significant fluctuations in funding rates reveal the limitations of the hedging tools at hand. USDe primarily depends on perpetual swaps for risk management, lacking a diverse array of instruments such as options and futures, thereby hampering its ability to quickly adjust hedging approaches amidst extreme market imbalances.
RWA Anchor Enhancement: The Future Direction for Non-Nationalized Currency
To address the shortcomings within its existing framework, integrating Real World Assets (RWA) like gold tokens and US stock tokens into USDe’s structure offers a precise remedy while aligning with the anticipated explosive growth trend of the RWA market, projected to reach $26.4 billion by 2025. This upgrade does not detract from the principle of denationalization; rather, it fortifies Hayek’s ideas by anchoring value to real-world assets. The underlying principle of RWA anchoring posits that currency value should stem from real assets that enjoy broad market consensus. RWA assets possess this quality, with gold being a time-honored currency and US stock tokens reflecting the economic performance of publicly traded companies. Treasury bond tokens further enhance this stability through their connection to the tax revenue capabilities of sovereign nations, providing a low-volatility benchmark. These assets are not contingent on the fluctuations of the crypto market but instead on real economic activity, offering a valuable buffer for USDe.
Strategy for Diversifying RWA Assets
The RWA anchor enhancement for USDe should prioritize “market consensus, risk diversification, and adaptability.” Leveraging the maturation of RWA tokenization, a three-tier system of “core-auxiliary-elastic” assets can be established. This structure could reduce USDe’s reliance on crypto-asset collateral from 80% to a more balanced 40%-50%, maintaining liquidity advantages while spreading risk across different asset classes. For instance, gold tokens demonstrate a low price correlation with ETH, providing a stabilizing element during downturns in the crypto market and mitigating the risk of panic sell-offs similar to those witnessed in October 2025.
Insights from the Austrian School: The Transition from Innovation to Maturity
The identified flaws in USDe and its potential RWA integration underline the dynamic essence of Hayek’s “Denationalization of Money”: a non-nationalized currency is not merely a static design but an evolving market process. Continuous self-correction and innovation are essential for success in currency competition. The evolution of value foundations from singular market consensus to a diversified asset anchoring reflects this principle. Presently, USDe’s reliance on crypto-asset collateral signifies an early form of non-state currency, with value consensus limited to the crypto community. Incorporating RWA assets expands this consensus to encompass traditional finance and the real economy, enhancing USDe’s value underpinning from “digital consensus” to “cross-domain real value.” This progression aligns with Hayek’s assertion that “money’s value should originate from widespread market trust.” With multi-asset backing—including crypto, gold, and US stocks—USDe’s resilience against individual market risks will significantly improve, establishing it as a “value carrier transcending sovereignty and singular markets.”
Refining Regulatory Mechanisms: Toward Multi-Market Coordination
Currently, USDe’s hedging strategy relies on a singular derivatives market, which highlights the underutilization of diverse market instruments. Hayek’s notion of “market self-healing” necessitates the integration of multiple market dynamics. By incorporating RWA assets, USDe can enrich its collateral base while enabling synergistic hedging across the “crypto derivatives market + traditional finance.” For instance, the volatility of US stock tokens could be managed through traditional stock options, while gold tokens might be hedged against forward contracts in the London gold market. This cross-market synergy would enhance the resilience of the hedging mechanism and reduce dependence on the liquidity of a single market.
Conclusion: From Innovative Benchmark to Evolutionary Model
The events in October 2025 not only confirmed USDe’s status as a benchmark for non-state currency innovation but also outlined its trajectory from “initial innovation” to “mature currency.” The fundamental distinction from LUNA-UST lies in USDe’s reliance on tangible value and effective market regulation. While the existing flaws in its institutional design are part of the growth journey, the MSX Research Institute posits that the strategy of incorporating RWA assets provides a clear evolutionary pathway for USDe. This approach does not negate existing innovations but rather enhances and refines them in line with Hayek’s insights. For market participants, the evolution of USDe serves as a critical lesson: the true competitiveness of non-state currencies arises not only from their determination to disrupt sovereign monopolies but also from their capacity for continuous self-correction. Their value is determined not just by short-term stability but by long-term resilience, connecting to real value and adapting to market changes. Upon completing its RWA upgrade, USDe will transform from a mere innovative experiment into a genuine cross-domain value carrier, poised to challenge the traditional monetary framework.
