Federal Reserve Bank of New York · Jun 23, 2026
Pablo D. Azar and Jeff Garofano argue in Liberty Street Economics that synthetic stablecoins can amplify shocks
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Published June 23, 2026, Pablo D. Azar and Jeff Garofano argue in Liberty Street Economics that Ethena’s USDe helped amplify a crypto-market downturn. USDe is a synthetic stablecoin whose design pairs staked ether with short perpetual futures rather than dollar reserves. The authors describe how falling funding income and rising costs can prompt redemptions; closing the positions can put pressure on futures and spot markets, lower collateral values and prompt further exits. They say USDe’s unwind played a material role in amplifying ether’s decline, while stressing that it occurred amid broader funding pressure and falling asset prices. They also report that USDC and USDT maintained their dollar targets during the episode. Their wider concern is that deeper links between crypto and traditional finance could transmit volatility across markets. A comment on the page disputes the account of the liquidation cascade, arguing that a Binance USDe price deviation, not Ethena unwinding its basis positions, triggered it. How much USDe’s unwind contributed to the ether decline remains unresolved in the retrieved page.
Headline and summary by Escape Meridian, prepared by Luna from the attributed source. A source check is not independent confirmation of the source’s claims.
Original source
Federal Reserve Bank of New York · Article
Source details
Original source date: Jun 23, 2026 (2026-06-23T11:00:00.000Z).
Date basis: Date supplied by the publisher’s feed.
Added to Escape Meridian: 2026-11-06T12:58:23.610Z. First observed: 2026-10-30T12:38:14.635Z. Retrieved: 2026-10-30T12:40:05.946Z.
Referenced by
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No public references recorded here yet.
Limits
Text as retrieved on October 30, 2026; originally published June 23, 2026. A commenter disputes the article’s account of the liquidation cascade; the retrieved page does not establish the commenter’s identity or independently resolve the competing explanations.
Open question
How much did USDe’s unwind contribute to the ether decline, given that the page also includes a comment attributing the liquidation cascade to a Binance USDe price deviation?
Source-stated
Azar and Garofano’s post was published on June 23, 2026.
June 23, 2026 Synthetic Stablecoins and Financial Stability Pablo D. Azar and Jeff Garofano
Source-stated
Azar and Garofano argue that USDe’s design transmitted and amplified a shock through the crypto ecosystem.
structural design turned an external shock into a self-reinforcing deleveraging spiral within the crypto ecosystem.
Source-stated
The authors say USDe’s decline and design suggest it played a material role in amplifying ether’s decline, while the episode occurred amid broader market pressures.
The deleveraging of USDe did not occur in isolation: it took place amid a broader funding squeeze and falling asset prices in native cryptocurrencies and other risky asset markets. But the magnitude of USDe’s declines and its design suggest it played a material role in amplifying the decline in
Source-stated
The authors report that USDC and USDT maintained their dollar targets during the episode.
Circle’s USDC lost $280 million in market cap that day and Tether’s USDT gained a nearly equivalent $282 million, while both maintained their dollar targets.
Source-stated
A comment on the page disputes the article’s explanation of the liquidation cascade, attributing it to a Binance price deviation rather than unwinding basis positions.
The liquidation cascade didn’t happen because of ethena unwinding basis positions, it happened because of a single exchange ‘dpeg’ of usde on binance
Source and contributor context
Federal Reserve Bank of New York · Publisher
The publisher is identified here. No individual author has been inferred.
Source media
Media retrieval status: unchecked.
Terms and references
Reference context selected by Escape Meridian; separate from source evidence. Entity mentions do not establish authorship, involvement or endorsement.
Editorial provenance
Version 1. Publication ID: 0ecc31c2-7a87-98f1-7803-d4cd266da56b.
Prepared by openai/gpt-6-luna; grounding review by anthropic/claude-opus-5.5.
Source check: uncertain by anthropic/claude-opus-5.5 on 2026-11-06T12:53:45.623Z. This checks fidelity to the source, not whether its claims are independently true.
Editorial selection: accept; reasons: bridge_admitted_by_model.
Observation: 81b96be1e33573f7c26c142e2d5b762dfe0d02cbdf37f41b4d711fbdc8e6ee77. Source text hash: 907d959766bd05e58a1a87e203f997827e40df223b819f273a05a5cf0e904569.
Revision and source-check history
Version 1 · 2026-11-06T12:58:23.610Z
Pablo D. Azar and Jeff Garofano argue in Liberty Street Economics that synthetic stablecoins can amplify shocks
Published June 23, 2026, Pablo D. Azar and Jeff Garofano argue in Liberty Street Economics that Ethena’s USDe helped amplify a crypto-market downturn. USDe is a synthetic stablecoin whose design pairs staked ether with short perpetual futures rather than dollar reserves. The authors describe how falling funding income and rising costs can prompt redemptions; closing the positions can put pressure on futures and spot markets, lower collateral values and prompt further exits. They say USDe’s unwind played a material role in amplifying ether’s decline, while stressing that it occurred amid broader funding pressure and falling asset prices. They also report that USDC and USDT maintained their dollar targets during the episode. Their wider concern is that deeper links between crypto and traditional finance could transmit volatility across markets. A comment on the page disputes the account of the liquidation cascade, arguing that a Binance USDe price deviation, not Ethena unwinding its basis positions, triggered it. How much USDe’s unwind contributed to the ether decline remains unresolved in the retrieved page.
Original source
Federal Reserve Bank of New York · Article
Source details
Original source date: Jun 23, 2026 (2026-06-23T11:00:00.000Z).
Date basis: Date supplied by the publisher’s feed.
Added to Escape Meridian: 2026-11-06T12:58:23.610Z. First observed: 2026-10-30T12:38:14.635Z. Retrieved: 2026-10-30T12:40:05.946Z.
Limits
Text as retrieved on October 30, 2026; originally published June 23, 2026. A commenter disputes the article’s account of the liquidation cascade; the retrieved page does not establish the commenter’s identity or independently resolve the competing explanations.
Open question
How much did USDe’s unwind contribute to the ether decline, given that the page also includes a comment attributing the liquidation cascade to a Binance USDe price deviation?
Source-stated
Azar and Garofano’s post was published on June 23, 2026.
June 23, 2026 Synthetic Stablecoins and Financial Stability Pablo D. Azar and Jeff Garofano
Source-stated
Azar and Garofano argue that USDe’s design transmitted and amplified a shock through the crypto ecosystem.
structural design turned an external shock into a self-reinforcing deleveraging spiral within the crypto ecosystem.
Source-stated
The authors say USDe’s decline and design suggest it played a material role in amplifying ether’s decline, while the episode occurred amid broader market pressures.
The deleveraging of USDe did not occur in isolation: it took place amid a broader funding squeeze and falling asset prices in native cryptocurrencies and other risky asset markets. But the magnitude of USDe’s declines and its design suggest it played a material role in amplifying the decline in
Source-stated
The authors report that USDC and USDT maintained their dollar targets during the episode.
Circle’s USDC lost $280 million in market cap that day and Tether’s USDT gained a nearly equivalent $282 million, while both maintained their dollar targets.
Source-stated
A comment on the page disputes the article’s explanation of the liquidation cascade, attributing it to a Binance price deviation rather than unwinding basis positions.
The liquidation cascade didn’t happen because of ethena unwinding basis positions, it happened because of a single exchange ‘dpeg’ of usde on binance
Source and contributor context
Federal Reserve Bank of New York · Publisher
The publisher is identified here. No individual author has been inferred.
Source media
Media retrieval status: unchecked.
Terms and references
Reference context selected by Escape Meridian; separate from source evidence. Entity mentions do not establish authorship, involvement or endorsement.
Editorial provenance
Version 1. Publication ID: 0ecc31c2-7a87-98f1-7803-d4cd266da56b.
Prepared by openai/gpt-6-luna; grounding review by anthropic/claude-opus-5.5.
Source check: uncertain by anthropic/claude-opus-5.5 on 2026-11-06T12:53:45.623Z. This checks fidelity to the source, not whether its claims are independently true.
Editorial selection: accept; reasons: bridge_admitted_by_model.
Observation: 81b96be1e33573f7c26c142e2d5b762dfe0d02cbdf37f41b4d711fbdc8e6ee77. Source text hash: 907d959766bd05e58a1a87e203f997827e40df223b819f273a05a5cf0e904569.
uncertain · 2026-11-06T12:53:45.623Z · anthropic/claude-opus-5.5
Publication: 0ecc31c2-7a87-98f1-7803-d4cd266da56b
attribution — pass: The reading correctly attributes the post to Pablo D. Azar and Jeff Garofano in Liberty Street Economics, published by the Federal Reserve Bank of New York. It keeps the anonymous comment separate and attributes it to a commenter, not to the authors. The page is one authored post, not a listing.
Pablo D. Azar and Jeff Garofano
summary — uncertain: The summary faithfully preserves the authors' thesis, their caveat about broader market pressure, and the USDC/USDT contrast. However, the central terms 'perpetual futures', 'funding income', 'staked ether' and 'basis positions' are not explained, and no definitions are supplied. A non-specialist would struggle to follow the mechanism. The triggering event, the October 10, 2025 tariff announcement, is also omitted, leaving 'a crypto-market downturn' without context. Smallest repair: briefly gloss perpetual futures and the funding rate as the source does, or add term-library entries, and name the October 10, 2025 shock.
They are contracts without an expiry date, designed to track the spot price of an asset through a recurring funding rate
date — uncertain: originalPublished (2026-06-23T11:00Z) matches the June 23, 2026 dateline at day precision. However, the page was modified on 2026-07-24, and the reading relies on a reader comment whose posting date is unstated. The comment may postdate original publication. The reading labels it as a comment on the page rather than part of the article, but its origin date is unclear.
One thing is wrong in your analysis though.
support — uncertain: The claims about the authors' argument, the material-role caveat, and USDC/USDT holding their targets are directly supported by the source. The comment claim is quoted accurately, but it is not part of the original article, and editedAfterPublication is true, so it may come from later page activity; it should be treated as uncertain. The question does not presuppose an answer and is supported.
The liquidation cascade didn’t happen because of ethena unwinding basis positions, it happened because of a single exchange ‘dpeg’ of usde on binance
media — pass: No media was selected, and no verified media candidates were supplied, so there is no identity or relevance problem.
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