In accordance with Blockbeats, the DeFi ecosystem has once again exposed its structural vulnerabilities following the collapse of Stream Finance’s xUSD in November 2025. The incident, which saw xUSD plummet from $1.23 to $0.23 within hours, revealed systemic issues including unsustainable high yields, opaque collateral structures, and recursive dependencies between protocols. Stream Finance’s strategy involved recursive lending to create uncollateralized synthetic assets, with xUSD supply expanding 7.6 times beyond verified reserves. The collapse triggered a $285 million cross-protocol exposure, with Elixir’s deUSD also crashing from $1.00 to $0.015 in 48 hours. The event echoes past failures such as Terra’s UST, Iron Finance’s TITAN, and USDC’s de-peg in 2023, all of which stemmed from similar flaws in risk management and transparency.
DeFi Stablecoins Reveal Structural Flaws Amid Stream Finance Collapse
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