Solana-based stablecoin USX briefly collapsed to as low as $0.10 on decentralized exchanges following a sharp liquidity disruption, before recovering close to its $1 peg after issuer intervention.
Key Takeaways:
- USX suffered a severe temporary depeg, crashing nearly 90% on select Solana DEXs amid thin liquidity and heavy sell pressure.
- The issuer confirmed the stablecoin remained fully collateralized, attributing the incident to secondary market liquidity issues rather than a protocol failure.
- Prices have since stabilized near $1, but the event has raised renewed concerns about stablecoin liquidity risks within DeFi ecosystems.
USX, a US dollar-pegged stablecoin built on the Solana blockchain, experienced one of the most abrupt and extreme short-term depegging events of the year, last Friday, December 26. On-chain analytics PeckShieldAlert has reported the incident on X (formerly Twitter), noting that liquidity on decentralized exchanges (DEX) such as Orca and Raydium thinned rapidly as traders sold positions, and available liquidity pools were unable to absorb the pressure. This imbalance allowed USX to trade as low as $0.10 on secondary markets, a 90% deviation from its expected $1 peg.
The sudden price drop did not align with any known protocol breaches or loss of collateral; rather, on-chain analytics flagged the abrupt liquidity drain as the primary driver. As liquidity providers withdrew or repositioned their assets, even modest sell orders could push prices markedly lower, exacerbating the slide.
Issuer Steps In as Liquidity Support Restores the Peg
As a response, USX issuer Solstice Finance as well as its associated market makers have injected fresh liquidity into affected pools. Thanks to their quick action, the price decline has been eased down and restored market confidence, which drove the USX back toward its peg. As of writing (11:00AM UTC), USX traded around $0.998-$1.00, reflecting full recovery in broader markets.
USX is back on its peg as it trades around $0.9993 as of writing (11:00AM UTC). Source: CoinMarketCap
The stablecoin’s sudden dip alarmed its community, expressing their worries and gratitude of how the team handled the incident especially in an urgent move.
In a public statement shared via X, Solstice emphasized that the incident was isolated to secondary market conditions and did not reflect any weakness in USX’s backing. The issuer stated that the stablecoin remained fully collateralized throughout the event and that primary redemption mechanisms continued to function normally, allowing authorized participants to redeem USX at a 1:1 ratio with the US dollar.
Analysts Flag Liquidity Risk in DeFi Stablecoin Markets
Blockchain monitoring firms were quick to flag the abnormal price action, with alerts drawing attention to liquidity imbalances rather than suspicious contract behavior. Analysts have since pointed to the episode as another example of how DeFi-based stablecoins can experience sharp dislocations when liquidity conditions deteriorate.
What’s Next
While the USX depeg has subsided and prices have largely returned to near-parity with the US dollar, the episode raises salient questions about stablecoin models that depend heavily on decentralized liquidity provision. Moving forward, market participants may expect deeper liquidity provisioning, enhanced risk monitoring, and stronger safeguards from protocol teams to prevent similar episodes.
The event may also prompt DeFi projects and investors to reassess how stablecoin liquidity is structured in pools, especially around holidays or low-liquidity periods. For now, USX appears stabilized, but its performance under future volatility conditions will be closely watched by both retail and institutional participants in the crypto ecosystem.
Summary
USX, a Solana-based stablecoin, briefly crashed to $0.10 on decentralized exchanges due to a sudden liquidity drain but recovered near its $1 peg after the issuer and market makers injected liquidity, highlighting DeFi stablecoin liquidity risks.
