In the aftermath, Ethena Labs issued an unscheduled Proof of Reserves report to calm investor concerns and address speculation about the token’s backing.

According to the company, USDe’s reserves are typically verified weekly by third-party auditors including Chaos Labs, Chainlink, Llama Risk, and Harris & Trotter. However, given the magnitude of the market turbulence, Ethena said it accelerated the release of its latest reserve audit “to reinforce transparency amid heightened uncertainty.”

The report revealed that USDe remains overcollateralized, with approximately $66 million in surplus backing, a figure Ethena said “demonstrates the stability of its structure even during extreme market stress.”

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Critics question whether USDe qualifies as a stablecoin

Despite the company’s reassurances, industry figures reignited debate over whether USDe truly fits the definition of a stablecoin. Conflux (CFX) co-founder Forgiven claimed the asset functions more like an investment certificate than a currency peg, explaining that “USDe operates as a fund instrument that targets a $1 value through revaluation, not as a stablecoin with fixed redemption.”

Forgiven argued that presenting USDe as a “stablecoin” is a strategic branding move meant to expand its market appeal.

Arbitrage liquidations blamed for collapse

Meanwhile, Formula News founder Vida suggested that the sharp drop may have stemmed from arbitrage mechanisms within the protocol. According to Vida, forced liquidations by USDe arbitrage traders depleted collateral reserves, which in turn triggered cascading margin calls and “chain liquidations” across the ecosystem.

Analysts noted that these feedback loops have become a recurring risk among algorithmic and synthetic stablecoins, particularly during extreme market conditions.

As of press time, USDe has partially recovered, trading around $0.91, while Ethena Labs continues to emphasize its transparency model as the foundation for rebuilding market confidence.

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