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|3 min ReadYield-bearing stablecoins tumble as three tokens lose their dollar peg
Maya Chen
Senior Analyst
Published
Jan 16, 2026
The $20.43 billion yield-bearing stablecoin sector took a beating this week as synthetic and algorithmic coins crumbled. According to stablewatch.io, the damage centered on deUSD, XUSD, and USDX—three tokens that lost their pegs within days. The mass exit triggered heavy outflows, falling confidence, and sharp drops in total value locked across decentralized finance.
Data from Stablewatch.io shows yUSD down 82.2%, mTBill off 59.5%, yUTY down 53.6%, and srUSD plunging 81.2%. Smaller coins like syUSD, sdUSD, and sUSDx nearly vanished, losing more than 60% each. Even major players like syrupUSDC, sDAI, and syrupUSDT slipped between 9% and 34%. Liquidity drained fast. Fear spread faster.
Still, not every project sank. USCC from Superstate and Aave’s sGHO both gained more than 16% in TVL, and Gauntlet’s gtUSDa shot up 114%, a rare bright spot amid the wreckage.
The chain reaction that broke the pegs
It started with Elixir’s deUSD on Nov. 6. The synthetic stablecoin, meant to earn yield through DeFi collateral, broke from the dollar after Stream Finance disclosed a 0.015. Stream Finance, which controlled 90% of the supply, failed to unwind its positions. Withdrawals froze. Partners scrambled to contain the fallout.
Hours later, XUSD—also from Stream Finance—followed. It plunged to 128 million exploit hit the Balancer protocol, wiping out key liquidity pools and igniting forced liquidations. The same exploit rippled to USDX from Stables Labs, which dropped into the 0.38 range. USDX’s market cap shrank 65% in a single day, hammering protocols like Lista DAO and Pancakeswap.
Stables Labs has since announced recovery plans, including onchain claim windows for affected users. But USDX still trades far below its $1 target, a reminder that algorithmic collateral systems remain dangerously fragile.
Market fallout and shifting yields
Across the category, hundreds of millions vanished from TVL this week. sUSDe (Ethena) fell 7% to 1.18 billion, and secondary assets like sDAI and vyUSD slid more than 30% and 46%.
Average seven-day APYs swung wildly. yUSD’s yield fell to 8.73%, while Upshift’s coreUSDC jumped to 11.99%. Midas’ mBASIS surged 10.1% to a 14.26% APY, showing some traders still chasing risk despite the bloodbath.
Algorithmic designs back in the hot seat
The string of depegs reignited old doubts about algorithmic stablecoins. Analysts compared the breakdown to the collapse of Terra’s UST, only on a smaller scale: rapid liquidations, halted redemptions, governance chaos. The pattern is the same. Too much leverage, not enough transparency.
Some projects bucked the panic. USCC and sGHO both saw steady inflows, suggesting investors now favor stablecoins with clearer collateral and institutional oversight. But the category’s market cap still slipped 1.46% in 30 days, landing at $20.43 billion. Yield-bearing stablecoins, once seen as safer DeFi bets, are proving anything but safe.
Stablewatch.io’s dashboards show tokens hiking APYs to lure liquidity back. Analysts warn the volatility will continue as developers rebuild trust. The lesson is blunt. The hunt for yield in DeFi always comes with risk. Even 20% APY can’t paper over that truth.
Disclaimer: This document is intended for informational and entertainment purposes only. The views expressed in this document are not, and should not be taken as, investment advice or recommendations. Recipients should do their own due diligence, taking into account their specific financial circumstances, investment objectives and risk tolerance, which are not considered here, before investing. This document is not an offer, or the solicitation of an offer, to buy or sell any of the assets mentioned.