2025’s Defining Crisis: Stream Finance Collapse and Elixir Depeg

Sentora’s blunt assessment of 2025’s biggest DeFi calamity landed on social media and crystallized what had been a jittery few days across Web3. Sentora tweeted, “We can’t look back on 2025 without mentioning the Stream Finance & Elixir losses. Stream Finance suffered a $93 million loss due to external fund manager failure, triggering a catastrophic default for their xUSD token.”

It further added, “As the markets scrambled to identify what curators and protocols were exposed, Elixir announced that they had significant allocation in Stream Finance and would not be able to cover the gap to repeg their stablecoin. The entire event highlighted the need for further transparency in DeFi vaults and asset curation as many curators and strategists were exposed to losses as they sought higher yields.”

The Fallout was Swift

Over the course of 2025, Stream Finance, which had quietly grown its assets through a mix of yield strategies and third-party fund exposure, saw its blue line climb from a modest base to a peak approaching the high hundreds of millions in TVL before collapsing almost overnight in late November. Elixir’s pink line, by contrast, traces a steady decline throughout the year and then plummets to near zero alongside Stream’s wipeout. The accompanying chart tells the story visually: what looked like a period of robust growth quickly became a cascade of liquidations and depegging.

At the center of the mess was an external fund manager. According to Sentora’s post, that third party’s failure created a $93 million shortfall that hit xUSD, a stablecoin that relied in part on Stream’s strategies, hard enough to force a default. The shock transferred rapidly through the ecosystem because a number of curators, strategists and protocols had concentrated exposure to the same off-chain or lightly audited instruments in search of better yields. When the losses materialized, there was no market backstop big enough to absorb them, and attempts to shore up xUSD failed.

Elixir’s admission that it had significant allocation in Stream Finance added the governance drama to the liquidity crisis. The protocol said it could not bridge the gap needed to repeg its stablecoin, a failure that underscored how composability, the strength of DeFi that lets protocols weave together yield, custody and token mechanics, can also become a channel for rapid contagion. Investors who believed risk was spread found instead that many popular yield strategies shared common, opaque counterparties.

The episode has already refocused attention on long-standing critiques of DeFi vault design and curation practices. Calls for more transparent reporting of off-chain relationships, mandatory third-party audits of fund managers, and clearer on-chain proofs of reserves have grown louder. For many observers, the event reaffirmed a basic lesson: higher yields often come with hidden counterparty concentration, and disclosures about those concentrations are still inconsistent at best.

Curators and strategists, those charged with picking yield sources and allocating capital, took particularly heavy criticism. In chasing returns, some chose complex or centralized managers whose risks were not fully visible to token holders. Now those actors are left explaining to communities why risk models failed, how much was lost, and what, if anything, they will do to make users whole. Reputational damage may be as costly as the dollars on the balance sheet.

What comes next is uncertain. Market participants will push for stronger safeguards: clearer governance around third-party relationships, better stress testing of stablecoins tied to pooled strategies, and tighter limits on what vaults can hold. Regulators, too, are likely to point to the event as evidence that crypto protocols with off-chain exposures need stronger oversight. For now, though, the most immediate task for the ecosystem is damage control, identifying every concentration, assessing residual exposure, and figuring out how to rebuild trust after a year in which transparency repeatedly proved the difference between resilience and ruin.

Source