Trading Strategy

In-depth investigation reveals that the fundamental reason for the de-pegging of Stream XUSD is not the Balancer hacking incident, but rather the failure of the Delta neutral strategy during the historic liquidation on October 11.

Although Stream claims to adopt a Delta neutral hedging strategy (1:1 configuration of spot and short positions), during the extreme volatility on October 11, the exchange's automatic deleveraging (ADL) system forcibly liquidated its positions, breaking the original hedging balance. This led to a direct loss of Stream's principal, which in turn triggered the de-pegging of XUSD.

Underlying issues include: a severe lack of transparency (only $150 million out of $500 million TVL visible on-chain), high-risk off-chain trading strategies (including selling volatility strategies), and excessive leverage (recursive borrowing through Elixir). Analysis indicates that Stream is merely one of the first victims to surface.

Given that October 11 was an unprecedented extreme liquidation event, it is expected that more DeFi projects will face similar issues in the future, highlighting the urgent need for stricter risk transparency standards in the crypto market.