The decentralized finance (DeFi) ecosystem is facing renewed turbulence as multiple algorithmic and yield-bearing stablecoins lost their dollar peg during the first week of November.
These depeg events wiped out hundreds of millions of dollars in value, underscoring deep systemic vulnerabilities across protocols that rely on layered, inter-locking mechanisms of borrowing, staking and re-depositing collateral.
Unlike fiat-backed stablecoins that remained relatively stable, the affected tokens were largely native to the DeFi sector: synthetic, algorithmic or yield-based stablecoins whose peg value depends on complex incentive loops and active user participation. As soon as confidence dropped or a large collateral position deteriorated, the peg collapse accelerated via liquidations and cascading withdrawals.
The key takeaway is that DeFi’s promise of “stable” yields and trustless collateral may be undercut by structural fragility when multiple risk factors align. For investors and protocol designers alike, the lesson is clear: simpler, more transparent collateral models and robust liquidity back-stops are becoming essential.
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