Liquidity drain causes Solana-based USX stablecoin to depeg to $0.1
The Solana ecosystem is facing fresh turbulence after USX stablecoin, a synthetic stablecoin issued by Solstice, suffered a sharp but temporary depeg on secondary markets.
The incident has reignited concerns around liquidity management, even as the issuer and independent analysts stress that USX’s collateral backing remained intact.
Sudden sell pressure rattles secondary markets
USX began losing its peg in the early hours of December 26, with market watchers noting unusual price movements shortly after 01:45 UTC.
Sell pressure on decentralised exchanges, particularly Orca and Raydium, quickly overwhelmed available liquidity, and as pools were drained, the stablecoin’s price slipped well below its intended $1 mark.
At the height of the disruption, USX reportedly traded as low as $0.1 on thin secondary markets, according to blockchain security firm PeckShield.
#PeckShieldAlert The stablecoin $USX on #Solana suffered a temporary depeg, dropping to $0.1 on secondary markets due to a liquidity drain. The peg was subsequently restored to $0.94 after @solsticefi injected liquidity.
Other traders and analysts observed prices in the $0.79 to $0.92 range as volatility rippled across Solana-based trading venues.
The wide variation underscored how fragmented liquidity and panic-driven selling distorted the price discovery process.
However, the depeg was confined to secondary markets, where the USX stablecoin trades freely on DEXs.
These venues rely on liquidity providers rather than guaranteed redemption mechanisms.
As sellers rushed to exit positions, arbitrage failed to stabilise prices quickly, allowing the discount to deepen before support arrived.
Solstice steps in to restore the USX stablecoin stability
Solstice acknowledged the volatility within hours and moved to address the imbalance.
At approximately 04:30 UTC, the team and its partners began injecting fresh liquidity into the affected pools.
On-chain data confirmed the intervention, and prices responded almost immediately.
Following the liquidity injection, USX’s price rebounded sharply, and the stablecoin began trading closer to parity.
Market data later showed the stablecoin hovering between $0.94 and $0.99, with some reports placing it near $0.987.
While the peg was not restored cleanly in a single move, stability gradually returned as depth improved.
Solstice has emphasised that the incident did not stem from a failure of backing.
Solstice has also stated that assets under custody remained unaffected and that USX stayed over 100% collateralized throughout the episode.
According to the team, the core protocol functioned as designed, and the disruption was purely a secondary market event.
The issuer also highlighted the distinction between primary and secondary markets. Institutional partners with permissioned access can mint and redeem USX directly at a 1:1 ratio, subject to KYC requirements.
Retail users, however, depend entirely on DEX liquidity, which can deviate from peg during periods of stress.
Questions linger despite the prompt intervention
Despite the swift response, the sharpness of the depeg raised eyebrows across the crypto community.
For some users, the damage was already done. Those who sold USX during the downturn locked in losses, as secondary market trades are final. Others who bought at a discount benefited from arbitrage opportunities created by the dislocation.
Although temporary depegs are not uncommon, a drop of this magnitude exposed vulnerabilities in how liquidity is distributed relative to circulating supply.
Temporary depegs often signal liquidity management issues, even if collateral remains intact. Watch for recurring volatility.
Several traders warned that reliance on manual intervention could amplify risk if market conditions worsen.
Actually, panic selling continued even after prices recovered, suggesting lingering unease among holders.
Some users even publicly compared the event to past stablecoin failures, including the collapse of Terra’s UST, though analysts stressed the comparison was flawed.
However, the USX stablecoin is neither algorithmic nor reliant on reflexive mint-and-burn mechanics, and its backing did not unravel.
Solstice has, however, countered the narrative by promising greater transparency.
The company has said that it has requested an immediate third-party attestation to verify reserves and pledged to deepen secondary market liquidity to reduce the chance of a repeat event, and stated that monthly proof-of-solvency reports are already available.
The post Liquidity drain causes Solana-based USX stablecoin to depeg to $0.1 appeared first on Invezz
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