Stream Finance Faces $93 Million Loss and 60% XUSD Drop

Overview of this crisis

Stream Finance, a decentralized finance (DeFi) protocol once known for its algorithmic yield strategies and stablecoin XUSD, is now facing one of the most severe crises in its history. The project’s external asset management partner is said to have suffered a loss of approximately $93 million, causing a severe decline in XUSD – down nearly 60% from its target of $1.

The incident sent shockwaves through the DeFi ecosystem, raising pressing questions about risk oversight, off-chain fund risks, and stablecoin transparency. As XUSD continues to trade below parity, Stream Finance is working to restore market confidence and stabilize its liquidity pool amid liquidity crunch and community backlash.

Loss and immediate freeze order

Disaster struck late on November 3 when Stream Finance announced a temporary halt to all platform operations, citing “significant losses” reported by an unnamed external fund manager overseeing a portion of the firm’s assets under management.

The shortfall, estimated at $93 million, stemmed from “unrealized positions” in leveraged yield strategies — allegedly tied to high-risk derivatives on undercollateralized loans — exposing a hole in Stream’s $150 million treasury.

XUSD, Stream's flagship stablecoin designed for "risk-adjusted yields of up to 12% APY," fell sharply in price in just a few hours, falling from $0.99 to $0.51 on Curve pools before partially recovering to $0.65 by midday on November 4.

The freeze prevented withdrawals by XUSD holders — mostly individual investors and DeFi borrowers — leaving $50 million in locked assets stranded and triggering a wave of panic selling, resulting in $285 million in collateralized loans on affiliated protocols.

In a brief blog post, Stream's CEO pledged "full transparency and recovery efforts," but omitted details about the fund's identity or audit trail, sparking fraud allegations from on-chain sleuths like ZachXBT, who flagged "suspicious wallet clusters" linked to the loss.

Wider consequences

The Stream Finance crisis highlights a serious flaw in the current development of DeFi — the integration of off-chain yield mechanisms without sufficient transparency. As DeFi has matured, many protocols have sought to increase yields through partnerships with external funds, tokenized treasuries, or off-chain credit markets. But as the XUSD depeg demonstrated, when those external systems fail, on-chain mechanisms alone cannot stop the contagion.

This could also prompt regulators and investors to take a closer look at stablecoins with hybrid collateral structures. The distinction between “crypto-native” and “institutionally integrated” stablecoins is blurring, but governance accountability remains uneven.

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