Sentora Flags $1B Risk in sUSDe Loop Trades Following Bitcoin Crash
Nearly $1 billion in leveraged DeFi positions tied to Ethena’s staked USDe (sUSDe) may be at risk following the Oct. 10 crypto market crash, according to a new report by Sentora Research.
The sharp sell-off in bitcoin (BTC) and broader crypto assets caused DeFi yields to tumble, flipping once-profitable looped trades into negative carry positions.
Looping Strategy Turns Risky
The so-called “loop trade” involves users depositing sUSDe as collateral on Aave or Pendle to borrow stablecoins such as Tether (USDT) and USD Coin (USDC). They then use the borrowed funds to purchase additional sUSDe, redeposit it, and repeat the cycle to amplify yield.
This structure relies on the spread between sUSDe staking rewards and stablecoin borrowing costs. But following the October flash crash, that spread turned negative.
“Funding rates have dropped significantly since the crash,” Sentora said. “Borrow costs for USDT and USDC now sit roughly 1.5–2% above sUSDe yields, putting looped strategies into loss territory.”
Leverage Unwinds Loom
As negative carry persists, Sentora warned that up to $1 billion in looped positions could face forced unwinds or collateral sales on Aave v3 Core, potentially weakening liquidity across major DeFi platforms.
Utilization in USDT and USDC lending pools has also surged, further driving up borrowing costs. Sentora noted an increasing number of accounts within 5% of liquidation thresholds.
“If utilization spikes continue, deleveraging pressure could accelerate,” the firm wrote, adding that traders should monitor the Aave borrow APY-to-sUSDe yield spread as a leading risk indicator.
The report highlights the fragility of yield-chasing DeFi loops, which remain highly sensitive to market volatility and rate compression — especially after abrupt shocks like Bitcoin’s recent crash.
