Crypto Market Turbulence Returns: Another USD Stablecoin Depegs as Bitcoin Drops Below $100,000 — What Are the Implications?
The cryptocurrency market is once again experiencing significant turbulence. This follows a period of instability last month, marked by the depegging of a U.S. dollar stablecoin and a widespread sell-off across various digital assets. Recent events include another stablecoin losing its peg to the dollar and Bitcoin falling below the $100,000 threshold after recording its first October decline in years.
Stablecoin Depegging and Bitcoin’s Drop Converge
Last week, USDX, a synthetic stablecoin issued by Stable Labs, severely deviated from its $1 peg, plummeting as low as $0.113. This triggered a cascade of liquidations across several lending platforms, with borrowing rates briefly skyrocketing to an astonishing 800%. Concerns intensified regarding potential contagion within the decentralized finance (DeFi) ecosystem.
Stable Labs, which claims to be an “EU MiCA-compliant issuer of stablecoins and tokenized assets,” announced in 2024 that it had raised $45 million at a $275 million valuation. Despite the severe depegging of USDX, Stable Labs has remained publicly silent, further fueling market uncertainty.
However, several mainstream DeFi protocols have swiftly responded. Lending protocol Lista DAO and Binance-backed decentralized exchange PancakeSwap issued statements confirming they are closely monitoring the situation. Lista DAO initiated an urgent governance vote to authorize the forced liquidation of relevant assets. The protocol stated that a major borrower linked to Stable Labs on its platform saw borrowing rates surge without any repayments. In response, Lista DAO executed a flash loan to liquidate assets, recovering over 2.9 million USD1 tokens to mitigate risk exposure. PancakeSwap also advised users: “Our team has noted the situation involving the affected vaults and is closely monitoring. Please assess and monitor your positions on PancakeSwap that involve these vaults.”
Concurrently, on November 7, Bitcoin retested the $100,000 support level. The substantial liquidations in October and ongoing selling by long-term holders left market sentiment extremely fragile. This selling pressure continued into November, with U.S. Bitcoin and Ethereum ETFs experiencing a combined net outflow of $797 million on November 4. Since the large-scale crypto market liquidations on October 10, capital outflows have shown distinct structural characteristics. This led Bitcoin to drop from approximately $110,000 on November 1 to below $100,000. In the same period, Ethereum fell from $3,900 to $3,100, erasing its year-to-date gains. The cryptocurrency market has corrected nearly 20% from its recent highs. Since mid-October, the implied volatility for Bitcoin and Ethereum has also risen in tandem, reaching 47% and 70% respectively, and remaining at relatively high levels.
Last October, Bitcoin also declined by nearly 5%, ending its streak of positive October returns since 2018. In a matter of days in mid-October, Bitcoin plunged from its then all-time high of $126,000 to $104,000, triggering one of the largest liquidation events in its history.
Analyzing the Genesis of Market Volatility
Zhao Wei, Senior Researcher at OKX Research Institute, explained that both the stablecoin depegging and the renewed decline in Bitcoin and other cryptocurrencies are interconnected consequences.
“On a macro level, early November saw a general pullback in global capital markets, with Japanese and Korean equities, which had hit new highs, beginning to retract, and U.S. futures broadly trending lower. Simultaneously, the Federal Reserve signaled no immediate urgency to cut interest rates, tempering market expectations for a December rate cut. This led to persistent high funding costs and pressure on risk assets. Concurrently, significant net outflows from Bitcoin ETFs indicated short-term institutional de-risking. Coupled with a record U.S. government shutdown and policy uncertainties arising from Trump’s tariff cases, overall risk sentiment became cautious, providing significant external pressure for Bitcoin to briefly fall below $100,000,” he stated.
“The USDX depegging can be viewed as a ‘secondary crisis’ within this market volatility. USDX is a yield-bearing stablecoin managed by DeFi protocols, relying on a complex system of collateralized assets and yield distribution. On November 6, a stablecoin called deUSD, part of a project named Elixir, plummeted due to capital losses. This incident triggered depegging across other similar yield-bearing stablecoins, including XUSD and USDX. Specifically, USDX’s value sharply declined due to damage to some of its liquidity pools from a hacking incident and subsequent panic selling by investors.”
Resilience Mechanisms: A Core Imperative
Adam McCarthy, Senior Research Analyst at Kaiko, a digital asset data provider, noted that cryptocurrencies tracked gold and equities near all-time highs in early October. However, when uncertainty truly hit investors for the first time this year, they did not return to Bitcoin in large numbers. The recent repeated declines remind investors that this asset class remains highly concentrated, with Bitcoin and Ethereum still prone to 10% drawdowns within 15-20 minutes.
Jake Ostrovskis, Head of OTC at Wintermute, a leading global crypto market maker, observed that market participants remain hesitant as they digest what has been one of the largest liquidation events to date. This caution persists amid ongoing speculation about specific vulnerabilities that may still exist within the system.
Zhao Wei informed First Financial that, in the short term, Bitcoin’s adjustment is more a reaction to tightening macro liquidity than a fundamental long-term breakdown. Market sentiment, after experiencing ETF capital withdrawals and heightened risk aversion, will require time to stabilize. From a medium to long-term perspective, as long as macro liquidity is re-released and an interest rate cut cycle begins, Bitcoin still has the opportunity to resume its upward trend. The market has already shown some recovery, and traders should continue to monitor macro policies and capital flows, adjusting strategies promptly according to market changes.
Regarding stablecoins, he believes a clearer differentiation will emerge. Traditional fiat-backed stablecoins (such as USDT, USDC) have relatively manageable short-term risks, but algorithmic and yield-bearing stablecoins will face more severe trust tests after this incident. Investors will increasingly scrutinize collateral transparency, protocol security, and the presence of genuine reserve backing. In the long run, stablecoin projects with institutional endorsement, real-time auditing mechanisms, and compliant issuance structures may ultimately benefit.
“This incident also serves as a renewed warning to all traders to focus on market interconnectedness and risk concentration. Seemingly unrelated factors like macro policy, ETF liquidity, and DeFi protocol vulnerabilities can trigger chain reactions in a short period. Only by maintaining strict position management and risk control can one navigate volatility steadily. For individual investors, understanding risk structure is far more critical than chasing high returns,” he emphasized.
Concerning the future of stablecoins and potential improvements, he asserted that stablecoins will not lose their significance due to one or two depegging events. Stablecoins like USDT and USDC, backed by real assets such as the U.S. dollar, carry relatively lower risk; the key lies in sufficient reserves and transparent custody mechanisms. However, “yield-bearing” or “algorithmic” stablecoins like USDX are inherently riskier. They typically maintain their peg through collateralized digital assets, algorithmic mechanisms, or DeFi yields. Once the market experiences severe volatility or collateral assets depreciate, they become susceptible to cascading depegging.
Regardless of the stablecoin type, he stressed that “resilience mechanisms” remain the core issue. Should a stablecoin cease to be stable, it could trigger a liquidity crisis across the entire trading market and potentially induce broader market volatility.
