After the October 10 market crash, which saw massive losses in Bitcoin (BTC $14,183.19) and other cryptocurrencies, nearly $1 billion in DeFi positions involving Ethena’s staked USDe (sUSDe) are now at risk, according to a new report from Sentora Research.
### Impact on DeFi Yields
Since the crash, Sentora notes that rates in DeFi markets have dropped significantly, shrinking yields on leveraged strategies such as the sUSDe loop trade. sUSDe is Ethena’s Staked USDe, a synthetic dollar stablecoin that generates yield by staking the underlying USDe token.
### Understanding the Loop Strategy
The popular loop strategy involves traders depositing sUSDe as collateral on DeFi platforms like Aave and Pendle to borrow stablecoins such as Tether (USDT $0.9999) and USD Coin (USDC). Traders then use the borrowed USDT to buy more sUSDe, which is again redeposited as collateral to borrow additional USDT and purchase even more sUSDe.
This cycle is repeated to amplify the yield generated by the positive carry — the difference between the sUSDe staking rewards and the borrowing costs.
### The Shift to Negative Carry
However, since the October 10 crash, the yield differential has flipped negative, denting the appeal of the loop trade. According to Sentora Research:
> “Following the flash crash on October 10, funding rates on DeFi markets have dropped significantly, cutting yields for basis-trade strategies. On Aave v3 Core, USDT/USDC borrow rates sit approximately 2.0% / 1.5% above the sUSDe yield, turning the carry negative for users borrowing stables to lever sUSDe.”
As the spread remains below zero, looped positions that borrow stablecoins to buy sUSDe start to incur losses. If this persists, it could trigger the unwinding of roughly $1 billion in positions already exposed to negative carry on Aave v3 Core.
### Potential Market Consequences
This negative carry may force collateral sales or deleveraging, weakening liquidity in the very venues providing leverage. Such a scenario has the potential to cause a cascading market effect, amplifying stress across DeFi platforms.
### What Should Traders Watch?
Sentora advises traders to closely monitor several key indicators:
– The spread between Aave’s borrow Annual Percentage Yield (APY) and the sUSDe yield, especially when it stays below zero.
– Utilization rates in USDT and USDC lending pools, since spikes in borrowing costs can accelerate stress.
– The number of looped positions nearing liquidation, particularly those within 5% of forced closure.
Moving forward, traders should keep a close eye on the spike in utilization rates in USDT and USDC lending pools, as this could increase borrowing costs and exacerbate stress amid the negative spread between Aave’s borrow APY and the sUSDe yield.
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By staying vigilant on these factors, traders can better navigate the evolving risks in the DeFi lending and leveraged stablecoin markets following recent market volatility.
https://www.coindesk.com/markets/2025/10/29/recent-bitcoin-crash-has-put-usd1b-in-susde-loop-trades-at-risk-research-firm-says