Ethena's USDE, the fifth-largest stablecoin by market capitalization in the crypto economy, temporarily deviated from its peg during market declines on Saturday. Data shows that the token, which aims to match the value of the U.S. dollar, dropped to $0.965 each. Similarly, FDUSD, the fourth-largest stablecoin, also fell to a low of $0.9557 per coin.

Following these events, the stablecoin sector is once again facing scrutiny as both USDE and FDUSD slipped below their intended pegs to the U.S. dollar during significant fluctuations in the crypto markets. USDE reached its lowest value to date, touching $0.965 on Saturday afternoon, while FDUSD had previously dropped to $0.9421 per token in Aug. 2023. The decline in USDE coincides with scrutiny from certain decentralized finance (defi) community members regarding its risk factors.

The instability for both stablecoins was brief, lasting approximately 30-45 minutes, with each recovering to $0.99 by Sunday, April 14, 2024, following a sharp decline in BTC's price. This incident sparked considerable commentary from both supporters and critics of Ethena, with one individual noting on X the following day, "So far so good: USDE passed its first stress test."

While FDUSD also experienced a decline, much of the discussion focused on USDE. "Ethena getting its first stress test with negative funding, should be short-lived but it was enough to briefly depeg USDE," another person wrote on the social media platform. "Ethena’s % of OI should self-regulate, but considering that a large % of USDE supply is locked in the Sats campaign there were no significant outflows."

However, some expressed pessimism about the stablecoin project. "Ethena will ultimately collapse because they are basing yearly funding within the previous 4 year cycles," another X user said. "After this glorious bull, we will have a longer 2-3 year bear market with negative funding APY. Reserve capital will not be enough to sustain the protocol and USDE will depeg."

The destabilization caused by depegging incidents has been a concern among crypto enthusiasts since Terra's UST deviated from its intended value tied to the U.S. dollar and failed to recover. Subsequently, several other stablecoins faltered following UST's decline, with some experiencing numerous redemptions, rendering them almost insignificant in the stablecoin market's landscape.

This occurrence highlights the inherent risks present in the stablecoin sector, emphasizing the difficulties of maintaining pegs during periods of market instability and significant price swings. Although the resilience of USDE and FDUSD was briefly questioned amid Saturday's market fluctuations, it demonstrates the intricate dynamics within the realm of U.S. dollar-pegged tokens.