USDX Depeg Explained: How a Synthetic Stablecoin Became Rug Pull

USDX Depeg Fallout Shows DeFi Risk, Liquidations, and Stablecoin Scam

USDX is a synthetic stablecoin issued by StablesLabs that is rapidly becoming one of the largest crypto rug pulls of 2025. Valued at $680 million, USDX had promised delta-neutral stability, crypto-backed reserves, and yield from arbitrage. 

However, in the case of a massive USDX Depeg, it appeared users were very much left in the dark: Discord was turned off, updates disappeared, and there was zero transparency. Let's dive in to see what happened and why this stablecoin crash has become a cautionary tale in DeFi.

What Was USDX Stablecoin Supposed to Be?

StablesLabs described USDX as a “delta-neutral synthetic stablecoin offering 100% crypto collateral, censorship resistance, scalable yield from arbitrage, and transparent reserves with insurance.” On paper, it sounded like a safe bet: stability, yield, and protection from traditional banking.

In reality, USDX was controlled entirely by the StablesLabs team. All the “yield” from arbitrage and other strategies was opaque. Users had to trust the team completely, and that trust has now been broken.

The Initial USDX Depeg

On November 6th, USDX lost its peg to the US dollar. The token dropped drastically, triggering liquidations across lending markets. Despite being supposedly fully backed, StablesLabs went completely silent. No posts on X (formerly Twitter), no messages in Discord. Nothing. The silence alone raised huge red flags, making many suspect a rug pull in progress.

Depeg Turns into a Rug Pull

By the end of the first day, StablesLabs disabled their Discord. This is a classic red flag. Disabling communication channels during a crisis prevents users from coordinating or even asking questions.

The first official statement came on November 8th. The team mentioned a “restoration agreement” to help holders recover funds. But the announcement only made things worse.

Source: X (formerly Twitter) 

They said the recovery is “voluntary” and not guaranteed. In other words, StablesLabs is making it clear that they are not legally obligated to honor redemption requests. Users were asked to fill out a Google Form to register for claims. It looked rushed, unprofessional, and not like a real attempt to help users.

The post also mentioned that execution would happen “in phases” depending on resources, liquidity, and cooperation without timelines or proof of reserves. For a delta-neutral stablecoin, this should have been immediate. The market reacted badly: USDX price crashed another 40% after the announcement. 

Source: CMC

This pattern of silence, vague recovery promises, and slow fade matches what we often see in crypto rug pulls. Without legal or investor action, recovering lost funds seems nearly impossible for most users.

Collateral Damage Across DeFi

USDX’s crash didn’t stay isolated. Stream Finance’s XUSD had a $280 million liquidation unwind, and USDX’s depeg caused stress across other vaults like Euler and Lista DAO. Borrow rates spiked 300% on Euler and over 800% on Lista DAO forcing massive unwinding of looping trades.

The USDX price swung wildly, dropping as low as $0.40, recovering to $0.80, and now hovering around $0.60. Thin liquidity amplified the crash, showing how interconnected DeFi strategies can create cascading failures when a major stablecoin fails.

Whale Bets Highlight the Risk

During the chaos, a whale investor risked $800,000 on the USDX Depeg. They bought 933,241 USDX at $0.8572, hoping for profit if redemptions happened. Potential gains of $135,000 are now uncertain. This shows how even experienced investors can lose big when central control replaces trustless systems in synthetic stablecoins.

What Caused the Depegging?

The full cause is not known, but the Balancer hack is suspected. USDX also suffered a liquidity loss from Arbitrum and Base chains after StablesLabs limited cross-chain flows. Abnormal borrowing rates and delayed repayments caused panic, accelerating the depeg. The silence of the team and a vague recovery plan added to market fear.

Lessons from the USDX Rug Pull

The USDX Depeg illustrates the risks of relying on centralized teams in DeFi. 

One of the fundamental principles of crypto is trustlessness: you must rely on code, not on people. USDX forced users to have complete trust in StablesLabs, and that trust was violated.

This means the effects of it will be far-reaching. Many funds and vaults had exposure to USDX, creating further high risk. Projects like Cork Protocol protect against these risks, helping to reduce cascading losses in DeFi.

High yield, high risk. USDX is an experiment that failed, but it also taught some important lessons to the crypto community: transparency of systems, risk management, and a truly trustless design will not allow such disasters.

Conclusion

The USDX Depeg is one of the most outrageous stablecoin scams in 2025. From disabled Discord channels to meaningless recovery announcements and market chaos, this case exemplifies the dangers of placing naive confidence in teams instead of code.

Investors should remember that high yield opportunities can involve catastrophic losses. USDX Depeg is a stern warning for all users in the DeFi space: be cautious, check liquidity, and understand the risks of investing with synthetic stablecoins.

USDX Depeg has caused huge losses, shaken confidence, and also exposed major gaps in transparency and risk management within DeFi. Its case will remain a cautionary tale for years to come.