A recent event in the decentralized finance ecosystem has highlighted the systemic risks associated with interconnected protocols. Elixir Protocol's synthetic stablecoin, deUSD, was forced to terminate support after a catastrophic loss at Stream Finance, resulting in a significant contagion chain.
The Cascade of Failures
On Tuesday, Stream Finance suspended withdrawals after an external fund manager disclosed net asset losses totaling $93 million.
Stream Finance's loss led to an immediate depegging of its stablecoin, XUSD, which had a ripple effect on Elixir's deUSD, with $68 million, or 45% of the deUSD market cap at the time, impacted by the XUSD depeg. As a result, deUSD depegged to $0.02, a 98% collapse from its $1.00 peg.
Sentora's Proactive Risk Management
Sentora had no exposure to XUSD or deUSD across Sentora curated or institutional vaults and strategies.
However, an advisory client had directed capital into a deUSD-linked derivative with support from Sentora.
On Monday, Sentora's risk management team identified the link between the two stablecoins and recommended a full exit; after the client’s internal review, they authorized us to proceed.
Execution was coordinated across our Risk and Operations teams. We withdrew the position from relevant liquidity pools, bridged back to ETH, and swapped into USDC using multiple routes.
The unwind completed in full roughly 12 hours before deUSD’s depeg—preserving our client’s entire $5 million position. This action sat outside our agreement with the client and carried no additional fee.
Why it mattered
This event illustrated how inter-protocol liabilities can magnify a single loss into systemwide stress. It also showed how quickly exit liquidity can vanish when bridges, redemptions, and market-maker inventories tighten simultaneously.
In that environment, in-depth and automated risk monitoring, escalation, and rapid execution determine outcomes.
Sentora’s mandate is simple: preserve client capital. We invest in proactive risk management in calm markets so we can act decisively when conditions turn, protecting our clients when it matters most.