Over $1 Billion in sUSDe Leverage Loops Exposed After Bitcoin’s Sharp Decline, Analysts Say

$1B in sUSDe Loop Positions Under Pressure After Crypto Crash, Sentora Research Warns

A sharp decline in digital asset markets has placed nearly $1 billion in decentralized finance (DeFi) looped positions involving Ethena’s staked USDe (sUSDe) at risk, according to a new report from Sentora Research.

The Oct. 10 crypto crash, which saw bitcoin (BTC) and other major tokens tumble, has upended once-profitable yield loop strategies. These trades typically involve depositing sUSDe as collateral on DeFi lending protocols like Aave and Pendle, borrowing stablecoins such as Tether (USDT) and USD Coin (USDC), and then using those funds to buy more sUSDe. Traders repeat this cycle multiple times to amplify yield.

However, Sentora said the market’s funding dynamics have flipped. Borrowing costs on Aave’s v3 Core platform now exceed sUSDe’s staking returns, creating a negative carry that erodes profits and increases risk for leveraged traders.

“Following the flash crash on October 10, funding rates in DeFi dropped sharply, cutting yields for leveraged basis-trade strategies,” Sentora told CoinDesk. “USDT and USDC borrow rates are now roughly 2% and 1.5% above sUSDe yields, turning the carry negative.”

With yields underwater, looped positions could face forced unwinds or liquidations. Sentora estimates about $1 billion in exposure is already at risk on Aave v3 Core. Sustained negative spreads may force traders to sell collateral or unwind positions, potentially weakening liquidity and triggering cascading deleveraging across DeFi markets.

The firm also warned that utilization rates in USDT and USDC lending pools have risen, which could further push borrowing costs higher and stress existing positions.

“Several looped positions are within 5% of forced liquidation,” Sentora wrote. “If utilization spikes again, we could see an accelerated deleveraging cycle.”

Sentora advised traders to monitor the spread between Aave’s stablecoin borrow APYs and sUSDe yields closely, as it remains the key indicator for stress in the current DeFi environment.

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