Elixir, a decentralized finance liquidity provider, has announced that it will wind down its deUSD synthetic dollar stablecoin.
The decision follows Stream Finance’s disclosure of a major loss that triggered ripple effects across the DeFi ecosystem.
What Happened Between Elixir and Stream Finance?
Earlier this week, Stream Finance announced a significant loss of around $93 million in assets managed by an external fund manager.
“Yesterday, an external fund manager overseeing Stream funds disclosed the loss of approximately $93 million in Stream fund assets,” Stream posted on November 4.
Following the incident, the platform suspended all withdrawals and deposits, stating that any pending deposits would not be processed until further notice. The company also stated that it is withdrawing all remaining liquid assets, a process it anticipates completing in the near term.
But why did this impact Elixir’s synthetic stablecoin? According to Nansen,
“Elixir parked 65% of deUSD’s collateral with Stream. Stream then lost $93 million using its own stablecoin (xUSD) as collateral. When xUSD dropped 77%, deUSD’s entire backing basically vanished. That set off a chain reaction: Stream froze withdrawals → redemptions halted → panic selling hit Curve. $30 million+ dumped onchain as holders raced to exit.”
Elixir responded by sunsetting its synthetic stablecoin. In a post on X (formerly Twitter), the network highlighted that it had processed redemptions for 80% of all deUSD holders.
“All remaining holders of deUSD and sdeUSD will be able to redeem for a dollar,” the team wrote.
Furthermore, the network revealed that it had taken a snapshot of all remaining holder balances. It also launched a claim page for users to redeem their assets in USDC.
“deUSD holds no value and the stablecoin has been sunset. Please do not buy or make investments into deUSD, including through AMMs,” Elixir added.
The decision led to a collapse in deUSD’s value. According to BeInCrypto Markets, the synthetic stablecoin plunged more than 97% in 24 hours and is now trading around $0.025.
deUSD Collapse. Source: BeInCrypto Markets
Meanwhile, the team noted that Stream Finance still holds around 90% of the total deUSD supply. It added that Stream accounted for over 99% of the lending positions and has opted not to repay or close them.
Elixir said that it will work with Euler, Morpho, Compound, and other curators to coordinate the repayment and liquidation process. The protocol said it still expects all claims to be honored on a 1:1 basis.
Thus, Elixir’s decision to wind down deUSD reflects the broader impact of collateral instability within interconnected DeFi systems. The event highlights how losses in one protocol can impact others and fuels ongoing discussions about collateral design, transparency, and risk management in decentralized finance.
