The $7 billion Ethena loop, and how it unwound

01 · The tradeHow the Ethena loop works

At the end of August 2025, $7 billion sat in one trade on Ethereum's lenders. People posted Ethena's dollar tokens, borrowed stablecoins against them and bought more, round after round. A year later $1 billion was left. Almost none of it had been liquidated on the way down.

USDe is the dollar token from Ethena. Ethena keeps it near $1 by holding crypto and shorting the same amount on perps, and the income from that hedge goes to people who stake. Staked USDe is called sUSDe. It is worth a little more USDe every day.

Pendle splits a yield token like sUSDe in two. Its principal token, or PT, trades on-chain below $1 and pays a full dollar on a set date. Buying one locks in a fixed yield.

The loop is simple. You post sUSDe, USDe or a PT on a lender such as Aave, borrow USDT or USDC against it, buy more of the same and post that too. Each round adds more yield and more debt. It pays as long as the collateral earns more than the loan costs, and every extra round multiplies the gap, whichever way it goes.

Plain USDe earns nothing by itself. People looped it anyway, because Ethena also handed out points, called Sats, to USDe holders. Points never show up on-chain, so our numbers leave them out.

02 · The riseFrom $125 million to $7 billion

It started small. In March 2024 the loop held $125 million, all of it on Morpho. By December it had grown more than tenfold, and Aave held most of it for the first time.

It shrank in early 2025, then took off once Aave listed its first Pendle token on USDe at the end of April. From May on, Aave usually held more than 90% of the loop, and 86% at the August 2025 peak of $7.0 billion.

By then, about four in five dollars looped on Ethereum's lenders were built on USDe, and two thirds of the loop was PTs. Two of those PTs, both paying out on September 25, held $4.6 billion between them.

03 · What paid for itYield in, interest out

The loop only pays while the collateral earns more than the loan costs. In its first months it did not. In March 2024, sUSDe paid about 30% per year and loopers paid more than 40% to borrow. The points were most likely the draw.

From the summer of 2024 the numbers worked. At the peak, the looped Pendle tokens paid almost twice what the loans cost. Then the gap closed. By October it was down to about one point, and through 2026 the yield and the cost both stayed close to 4%. One point of profit, looped ten times, is still thin. A single jump in borrowing rates wipes it out.

04 · Payout daysWhen the Pendle tokens came due

Thin margins made leaving easy, and Pendle's calendar made it natural. A PT has an end date. On that day a looper has to close the position or roll into a newer PT, so payout days are when money leaves.

Until July 2025, loopers kept two fifths to two thirds of their positions going after a payout. From August to November they kept only a fifth to a quarter.

The big one came on September 25. That day the two Pendle tokens at the top of the loop came due, and a month later four in five of the wallets holding them had closed out, taking $3.5 billion with them. Most of the money that stayed moved into the next Pendle tokens, due in November.

05 · The runOne week in April

The last big exit had nothing to do with Ethena. On April 18, one wallet borrowed tens of thousands of WETH from Aave against rsETH, a restaked ETH token, that had left the rsETH bridge minutes earlier. Aave later wrote off more than $120 million on that position, as our data feature on Ethereum lending explains.

Within two hours, depositors began pulling stablecoins out of Aave, almost $1 billion in a single hour. Over two days about $2.5 billion of USDT and USDC left, net, and with that much less cash to lend, the cost to borrow both jumped more than fourfold, to 15% per year.

For a loop earning about 4%, that meant losing money on every borrowed dollar. Loopers repaid, and $1.8 billion of USDe and sUSDe collateral left Aave within a week. By the end of April the loop was less than a third of its March size. Very little of that was forced. Liquidations on USDe tokens that month came to $213,000.

06 · Who ran itThe fifty biggest wallets

At the peak, the fifty biggest wallets held just over half the loop, and nearly all of them were plain wallets. No pooled vault made the list. That is unusual. In lending as a whole, half of the ten biggest borrowers in August 2026 were vaults. Our labels name almost none of these wallets.

07 · The damageWhy so few loopers were liquidated

Across the whole period, lenders liquidated $38 million of loans backed by USDe tokens, two thirds of it on Aave. Bad debt booked on them came to $1,263. For a $7 billion trade that is close to nothing, and part of the reason is how Aave prices USDe.

Loops run close to the edge, so a small dip in the collateral's price can set off a liquidation. Until March 2025, Aave priced USDe with a market feed for USDe itself. On the afternoon of February 21, 2025, that feed dipped below 99 cents. Within five minutes, five sUSDe-backed loans worth $21.4 million were liquidated on Aave. Two weeks later Aave moved both tokens to a USDT price source, and it has priced USDe as if it were USDT ever since, however the market for USDe itself moves.

The test came that October, on a day of heavy liquidations across crypto. Aave's price for USDe stayed at about $1. Aave liquidated over $100 million of loans that day, and almost none of it was backed by USDe tokens.

Few liquidations does not mean nobody lost. Anyone who stayed in while borrowing cost more than the yield lost money slowly, and we cannot see what the points were worth to them in the end.

08 · What ended itA trade that stopped paying

So what ended the Ethena loop? The yield that paid for it shrank until it barely beat the cost of the loans. Pendle's payout days then gave people a clean moment to walk, and April's run on Aave pushed out most of what was left. At every step people chose to go. Almost nobody was forced.

It still left a mark. In the year after the peak, loops of every kind on Ethereum shrank by almost $15 billion, as our look at Ethereum lending since 2021 shows. The Ethena loop was about two fifths of that, and most of it had sat on Aave.

09 · How we measuredWhat we counted, and what we left out

We rebuilt every loan on Ethereum's main lenders, month by month, from their on-chain events. A loop here is a stablecoin loan backed by USDe, sUSDe, a Pendle token built on them or a small wrapper of USDe. Loans in dead markets are left out.

Pendle yields come from each market's own on-chain rate, and borrowing costs are what loopers actually paid, averaged across lenders by how much they owed. We did not count the value of Ethena's points, or loops on other chains.

10 · The recordThe contracts behind the numbers