Stream chain explosion? Yala mortgaged its own stablecoin YU to borrow one million dollars, and today it depegged and fell 54%.

The Bitcoin over-collateralized stablecoin YU has experienced a depeg today, with the price falling to 0.41 USD at one point. This marks the second depeg of the Yala protocol stablecoin within just two months, including last month's million-dollar loss due to a minting vulnerability, and the current liquidity event seemingly triggered by the collapse of Stream Finance.

(Stream confirms insolvency! On-chain stablecoin chain reaction: Elixir abandons deUSD, USDX depegs to 0.5)

Yala YU price depegged to 0.4 USD, liquidity crisis emerging.

CMC data shows that YU has plummeted by 54.3% in the past 24 hours, reaching a low of $0.41. The trading volume has also decreased to only $12,000, down 90% compared to the previous day. The available liquidity in the main Uniswap YU/USDC pool is also critical, with 90% of it composed of YU, meaning users are almost unable to sell.

As a Bitcoin-based over-collateralization stablecoin protocol, Yala allows users to deposit BTC and mint the stablecoin YU, while retaining exposure to the price of BTC. The protocol has also received capital support from Polychain, Amber Group, and Galaxy Digital.

The lending market signals a warning in advance: a single address borrows a million dollars regardless of high interest rates, raising concerns.

Two days before the depeg occurred, the community had warned of anomalies in the Yala lending market.

DeFi player @yieldsandmore pointed out that an address highly correlated with Yala, bearing a borrowing interest rate of up to 80%, mortgaged YU to borrow all the USDC and most of the YU from the Euler Yala Frontier market, resulting in the market utilization rate remaining at 100% for an extended period, making it impossible for lenders to withdraw.

Yala related lending address position

The Euler team has adjusted the borrowing limit of the Yala Frontier market to 0 and called on the Yala team to respond to the contact. This situation of “over-collateralizing a large amount of printed YU and borrowing extensively regardless of costs” is interpreted as a precursor to a crisis facing the stablecoin or lending protocol.

KOL @LumaoDoggie also revealed that team members have consecutively resigned last month, and that the official Discord and X posts have stalled or gone unanswered, raising concerns in the external community.

Last month, a major vulnerability was exposed: attackers illegally minted 120 million YU and stole 7.6 million dollars.

The depeg of YU is not the first time. Just last month, the LayerZero OFT bridge used by Yala faced a configuration error, allowing attackers to illegally mint approximately 120 million YU on Polygon, and then cross-chain exchange it for real assets to escape, resulting in a loss of about 7.6 million dollars.

Although Yala claimed to have recovered most of the funds and fully compensated the affected users, YU had also depegged to between $0.70 and $0.95 for a period of time before stabilizing later.

Liquidity finds no outlet: YU stablecoin holders have no way to claim compensation.

Currently, the stablecoin YU has significantly depegged for over 10 hours, and at the same time, the token lacks liquidity on both EVM networks and Solana, making it difficult for all holders to exit, pushing it back into the spotlight with rumors of a run.

The team only stated through an article: “We have noticed the recent concerns of the community and are actively investigating. Further updates will be released later.”

However, recent consecutive events, including the collapse of xUSD issuer Stream Finance and the depeg of deUSD and USDX, have put the “stability” of the term stablecoin under scrutiny and doubt.

( Bloodbath in DeFi: The Truth Behind the Collapse of Stream xUSD: High-Risk Operations Behind the Illusion of Stablecoins )

Is this article about Stream's serial explosions? Yala collateralizes its own stablecoin YU to borrow millions of dollars, now depegged and plummeting 54%, first appeared in Chain News ABMedia.