Stream Finance XUSD Stablecoin Crashes 70% Following $93M Loss
Stream Finance sent shockwaves through the decentralized finance sector on November 4, 2025. The platform disclosed that an external fund manager reported the loss of approximately $93 million in managed assets. This revelation triggered an immediate crisis for the platform’s native token.
The Staked Stream USD (XUSD) stablecoin crashed to $0.30, marking one of the steepest depegs of the year. The token was designed to maintain a stable $1 peg. XUSD traded at approximately $0.29 at press time, representing a decline exceeding 70% within 24 hours.
The collapse happened swiftly. Blockchain security firm PeckShield first flagged the issue, noting that XUSD had fallen by 23% before the decline deepened to 58% within an hour. Users across decentralized exchanges watched their holdings evaporate as confidence in the protocol’s underlying collateral vanished.
Stream Finance Suspends Operations Amid Investigation
Following the discovery, Stream Finance announced a complete pause on deposits and withdrawals. The platform operates as a recursive, looping yield-generating DeFi protocol. It features a collateralized stablecoin system that relies on complex yield strategies.
The project has engaged legal counsel Keith Miller and Joseph Cutler from Perkins Coie to thoroughly investigate the matter. The team stated they are actively withdrawing all liquid assets and expect this process to be completed soon. They promised periodic updates as additional information becomes available.
The timing raised questions. Many users sensed potential issues before any official announcement. Users had questioned the sudden suspension of deposits and withdrawals without prior communication from the platform’s team. The lack of transparency fueled speculation about what happened behind the scenes.
XUSD Stablecoin Devaluation Exposes DeFi Vulnerabilities
Stream Finance operates a synthetic asset protocol that issues tokens, including xUSD, xBTC, and xETH, each backed by on-chain collateral. The model relies on overcollateralization and rehypothecation to maximize capital efficiency. While this design boosts yield, it dramatically increases systemic risk.
Independent DeFi analysts mapped approximately $285 million in potential exposure tied to Stream Finance’s loss across lending markets, stablecoins, and liquidity vaults. Stream’s debts span at least seven networks and involve numerous counterparties. The interconnected nature of DeFi protocols means failures cascade through multiple platforms.
The XUSD crash highlights DeFi’s ongoing struggle with stability and trust. The fallout triggered losses not only for XUSD holders but also for users exposed through other synthetic tokens like xBTC and xETH. Platforms including Euler, Morpho, and Silo face indirect exposure through their tied lending markets.
Market Impact and Regulatory Concerns
The incident marks one of the most significant stablecoin disruptions in 2025, reigniting concerns over off-chain fund exposure and opaque management practices in DeFi ecosystems. Analysts note that the case highlights persistent vulnerabilities in protocols that rely on third-party asset managers rather than fully on-chain collateralization.
The collapse occurred shortly after another major DeFi incident. The Stream Finance incident followed an exploit on Balancer V2, which led to $128 million in losses. These back-to-back events have shaken confidence across the entire sector.
The event reignited discussions on stricter proof-of-reserve standards and real-time audit requirements. Without these reforms, the sector risks facing deeper structural fragility. User confidence continues to decline as high-profile failures mount.
Conclusion
The Stream Finance collapse demonstrates critical weaknesses in hybrid stablecoin models. Stream Finance does not maintain a comprehensive transparency dashboard or Proof of Reserve. This lack of real-time visibility prevented users from assessing their actual risk exposure.
Perkins Coie’s involvement suggests Stream Finance may pursue restitution or legal recourse against the fund manager. The law firm is also expected to assist in liaising with regulators as authorities monitor the situation’s broader impact on stablecoin trust. The regulatory scrutiny could reshape how DeFi platforms operate moving forward.
The crypto community faces difficult questions. How can investors trust stablecoins that rely on external managers? What safeguards prevent similar collapses? These issues demand urgent attention as DeFi continues to evolve.
