Solana Stablecoin USX Crashes to $0.10

On December 26, USX dropped to 0.10, as liquidity dried up, but it has since recovered to 0.94, as Solstice Finance contributed to the emergency liquidity in the secondary markets. 

On December 26, USX on Solana crashed drastically to $0.10 in the secondary market due to a critical lack of liquidity.  

PeckShield Alert on X stated that the stablecoin dropped drastically because of the liquidity drainage. The security company immediately raised a red flag on the event, and Market participants witnessed one of 2024’s most extreme stablecoin depegs.

Source: PeckShield 

Liquidity Vanishes: What Triggered the Crisis?

Secondary markets were severely illiquid. The sell orders flooded the buy-side depth of decentralized exchanges, and the USX trading venues on Orca and Raydium were under extreme pressure.  

The price soon came out of the dollar peg. The destruction of liquidity triggered panic selling, and CoinGecko logged a new all-time low of $0.8285.  

Solstice Finance acted promptly over the crisis. The team published a statement on X responding to market issues and affirmed that the underlying collateral was not affected in any way.  

The net asset value and collateralized assets were rated as over 100 percent. Solstice remarked on X. Primary-market redemptions continued to operate at 1:1 ratios, and the team pointed out that the problem was secondary-market in nature.  

Emergency Liquidity Injection Stabilizes Peg

Market makers and Solstice Finance pumped in emergency liquidity. The intervention dragged USX back to an approximate $0.94 and the volume of trading increased 500 percent to $17 million in the recovery.  

Since that time, the stablecoin has rebounded around the 1.00 mark; at this time of day, USX is around 0.995, and the price movement has been just a 0.3 per cent decrease.  

Nonetheless, market weaknesses were revealed through the intraday swing. Prices fluctuated between 0.8285 and 1.01, which showed weakness in the secondary-market structure.  

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Pattern of Stablecoin Instability Emerges

The incident is a reflection of previous depeg events of 2024. In April, Synthetix saw its sUSD drop below $0.70, and its founder, Kain Warwick, changed the name of his social account to kain. depeg.  

The XUSD of Stream Finance fell to $0.30 in November; the protocol said it had suffered a loss of $93 million, which was caused by problems with external fund managers.  

USX is radically different from such cases. There was no collateral damage or loss, and the depeg remained confined to trade venues.  

Solstice made a promise to receive third-party attestation and intends to restore market confidence. Independent verification reports will be published publicly.

Market observers identified the dependency in the secondary market. Retail users do not have any DEX liquidity, but institutional partners do.  

The episode on USX highlights the risks in the market of stablecoins. Collateral in itself will not keep prices stable; liquidity depth is also a key to keeping pegs.

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