Stream Finance's leveraged yield loop broke — its xUSD stablecoin lost 75% in a day

Stream Finance ran a family of yield vaults built on its own stablecoin, xUSD. To sustain double-digit yields it looped deposits through leveraged lending — borrowing and re-lending its own and partner assets on the Morpho and Ruler protocols — so a relatively small base of real deposits was rehypothecated into far larger leveraged positions. The high yields propped up by the loop drew in deposits that at their peak pushed the protocol's total value locked above $200 million.

In the days before 4 November 2025, an external fund manager overseeing Stream funds disclosed it had lost approximately $93 million in Stream fund assets. Stream halted deposits and withdrawals on 4 November 2025 and retained the law firm Perkins Coie to respond. The same day xUSD depegged by more than 75%, trading near $0.30 against a target close to $1.27, and total value locked fell below $100 million after a $50 million single-day drop.

xUSD was one leg of a 'daisy chain' of DeFi lending that also involved YieldFi's yUSD and Elixir's deUSD, much of it resting on Midas's mHYPER. When Stream's loop unwound, spiking borrowing rates and the collapse of xUSD spread stress through that chain. The transparency that might have warned depositors was thin: Stream's proof of reserves was a bundle of wallet addresses, and its transparency page had not been published.