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Liquidity Crunch Breaks Yala's $YU Peg, Revealing Weaknesses in DeFi

Liquidity Crunch Breaks Yala's $YU Peg, Revealing Weaknesses in DeFi

Bitget-RWA2025/11/18 02:50
By:Bitget-RWA

- Yala's YU stablecoin plunged 53% from $1 to $0.47 due to Euler platform liquidity crisis and suspected insider USDC-YU pool draining. - Silent governance response and September bridge hack ($7.64M loss) intensified doubts about risk management and rug pull risks. - Market cap dropped to $39.6M with 98.7% trading volume collapse, highlighting DeFi stablecoin fragility amid concentrated liquidity risks. - Yala plans December 15 recovery plan but faces Euler restrictions and partial fund recovery after Octo

The Yala stablecoin (YU) has suffered a sharp decline of almost 53% from its intended dollar value, marking its second significant loss of peg since its debut in May 2025. As of Nov. 16 (UTC), YU had dropped to $0.47,

triggered by heavy borrowing activity on the platform, according to several sources. This event has renewed debates over the reliability of DeFi-backed stablecoins and cast doubt on Yala’s governance and risk controls.

The loss of peg started at around 10:30 a.m. on Sunday when

funds from USDC–YU liquidity pools, leading Euler to halt YU lending operations. Yala’s team has not addressed the situation publicly, remaining silent on Discord, which has led to rumors of a possible exit scam. This comes after a previous incident in September when to create 120 million unauthorized YU tokens, temporarily disrupting the peg until the team managed to restore it.

On Nov. 18, Yala

and described its actions in response. The team referenced the September breach, which resulted in a $7.64 million loss in and to a broader trend of retail investors leaving DeFi, adding to liquidity challenges. Despite injecting $5.5 million to help stabilize YU after the hack, the project is now facing further obstacles as Euler restricts positions that support the peg. Yala with authorities and partners to secure additional funds, but cautioned that the process will require time.

Liquidity Crunch Breaks Yala's $YU Peg, Revealing Weaknesses in DeFi image 0

This crisis has highlighted weaknesses in DeFi stablecoin frameworks, with analysts

of relying too heavily on concentrated liquidity pools. The YAM team had previously cautioned about similar threats due to bridge vulnerabilities and abnormal borrowing patterns. Yala’s market cap has , and trading volume has plummeted by 98.7% to $11,600, reflecting a significant loss of investor trust.

Yala has pledged to

by Dec. 15, 2025, detailing measures to reestablish the peg and ensure sustainable liquidity. This schedule coincides with ongoing legal efforts to retrieve assets from the September breach, during which after Bangkok authorities apprehended the suspect in late October. However, by a decline in ETH prices after the seizure, reducing the value of the returned funds.

This episode demonstrates the vulnerability of algorithmic stablecoins in unstable markets. Although Yala’s backers—Polychain, Amber, and Galaxy—initially provided institutional support,

that even well-funded projects can be destabilized by liquidity shocks. For the DeFi sector, this situation of robust collateral practices and transparent governance to restore confidence.

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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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