Ethereum Updates: DeFi Faces Widespread Threats as Gauntlet Recommends Urgent Market Suspension

Bitget-RWA2025/11/05 10:02

By:Bitget-RWA

- DeFi firm Gauntlet proposes emergency pause of USDC/USDS/USDT borrowing on Ethereum's Compound v3 to prevent losses from Elixir's deUSD/sdeUSD collapse. - Stream Finance's $93M loss and xUSD's $0.24 plunge exposed systemic risks as Elixir tokens lost 70% value, triggering cross-protocol failures. - Critics warn the pause erodes trust, while Gauntlet stresses updated risk parameters are needed to stabilize artificially inflated oracle prices. - Recent Balancer's $100M exploit highlights compounding DeFi v

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DeFi analytics company Gauntlet has

put forward an urgent proposal to halt

the borrowing of

USDC

, USDS, and

USDT

on Ethereum’s

Compound

v3 platform, citing a liquidity emergency involving Elixir’s deUSD and sdeUSD tokens. Announced on November 5, this action seeks to limit further damage as these tokens—used as collateral in the impacted markets—have experienced sharp declines in value. Gauntlet’s recommendation is to freeze withdrawals and new loans until risk parameters are revised and approved by governance, though the proposal is still awaiting formal adoption.

Ethereum Updates: DeFi Faces Widespread Threats as Gauntlet Recommends Urgent Market Suspension image 0

The urgency follows a

reported $93 million loss of assets

at Stream Finance, a DeFi platform focused on yield, which revealed the incident after an external fund manager exposed the deficit. Stream’s stablecoin,

xUSD

, quickly

dropped to just $0.24 on November 4

. The downfall was linked to Elixir’s deUSD and sdeUSD, which lost over 70% of their value, setting off a cascade of effects across related protocols. In response, Stream Finance has

halted deposits and withdrawals

and has brought in law firm Perkins Coie to conduct an investigation.

Gauntlet’s proposal draws attention to the systemic dangers of recursive DeFi tactics, where leveraged trades and unclear fund management can magnify risks. The firm pointed out that the price feeds for deUSD and sdeUSD were artificially high, enabling users to borrow against collateral at values well above the real market price—a major vulnerability that fueled the crisis. “Pausing these markets is the only way to stop further withdrawals that could destabilize the system, at least until governance approves new risk parameters,” a Gauntlet spokesperson said, as posted on the

Compound Community Forum

This action has stirred discussion in the DeFi space. Many see the pause as a necessary safeguard, while some critics argue it could erode trust if prolonged. “Every hour these markets are frozen chips away at confidence in Compound’s liquidity assurances,” one forum user commented. Others stressed the importance of more rigorous collateral screening, especially for major stablecoin pools.

The incident highlights deeper weaknesses in DeFi’s rapid growth. Just days earlier, the automated market maker

Balancer

suffered a $100 million hack, adding to concerns about protocol safety. Analysts such as Omer Goldberg from Chaos Labs connected the two events, suggesting the Balancer exploit may have sped up capital outflows from riskier protocols.

Currently, the

Ethereum

stablecoin markets are in a fragile position. Gauntlet has called for swift governance decisions to update supply limits and restart activity, but no schedule has been announced. Meanwhile, users remain uncertain as platforms like Yei Finance and

Falcon Finance

also contend with unusual market behavior. Further analysis, including a comprehensive report on the situation and its repercussions, has been published in outlets such as

DeFi Planet

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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1. Technology stocks fell sharply as investor interest shifted toward energy and selected defensive assets. From October 10 to 16, the Nasdaq 100 declined 5.49% and the S&P 500 fell 1.95%, while the Dow gained 0.67% and WTI crude rose 10.41%. BTC, ETH, and SOL declined 1.27%, 2.65%, and 4.44%, respectively. This week's technology earnings will be an important test of whether revenue growth, margins, and cash flow can justify current valuations. Better-than-expected results could help stabilize markets in the near term. 2. Crypto continues to see pockets of strong activity, but a broad-based altcoin season has yet to materialize. CoinMarketCap's (CMC) Altcoin Season Index stood at 54 as of the October 18 UTC daily observation, below the altcoin-season threshold of 75, while BTC dominance rose to 60.08%. Our proxy leverage ratio fluctuated between 4.00 and 4.07 during the week, showing no sustained increase and suggesting limited appetite for additional leverage. Meanwhile, as major exchanges expand access to traditional financial assets, the recent sell-off in AI-related equities could attract short-term speculative capital away from crypto. Such capital rotation could make it more difficult for a new altcoin season to take hold. 3. Papertrade's loss-to-mine model has generated significant interest across the crypto community. The protocol combines high-leverage derivatives trading with zero slippage and a mechanism that rewards trading losses with PAPER tokens. Across the eight complete UTC days from October 10 to 17, cumulative reported revenue reached approximately $56.08 million, including $51.90 million distributed to token holders. With growing participation from key opinion leaders (KOLs), Papertrade has reportedly ranked among the top three platforms by profitability in the broader market recently. Assets to watch: BTC, ETH, SOL, ARB, OP, SKHYNIX, SKHY, META, TSLA, LRCX, and SPCX. Key research priorities this week: Cash flow performance in technology earnings; the relative discount and holding costs of the two SK Hynix contracts; and U.S. initial jobless claims and PMI data. Weekly market data cover the period through October 16, while research information was verified through October 18. Observation periods are specified separately for each chart.

Bitget•2026/10/19 06:51