USDe Supply Shrinks $1.9B as Ethereum Funding Turns Negative

USDe lost $1.9B in a day as traders cut leverage, showing how fast confidence and liquidity can fade in crypto markets.

Ethereum’s funding rate turned negative, signaling traders closing long positions and shifting toward risk reduction and safety.

The burn of 13% of USDe’s supply shows a strong market pullback driven by falling demand and heavy liquidation pressures.

A sharp contraction has hit the USDe market, erasing $1.9 billion of supply within 24 hours. According to analyst Julio Moreno, “$1.9 billion USDe burned since yesterday, 13% of total supply, as funding rates turned negative.”

The sudden contraction follows a steep decline in Ethereum’s funding rate, signaling broad deleveraging across the derivatives market. Data from CryptoQuant, covering early July to early October, reveals how the shift unfolded through changing minting and burning activity.

During July, USDe’s minted supply grew steadily as market conditions improved. The green segments of the chart represented newly minted USDe, showing moderate but consistent growth

Meanwhile, the ETH funding rate moved slightly positive, hinting at growing long exposure in Ethereum positions. Besides, late July and early August saw a sharp rise in minted volumes while burned amounts stayed minimal. Hence, this phase marked strong expansion and leveraged optimism among traders.

Source: Julio Moreno

However, by mid-August, the trend briefly reversed. Burned supply rose while the ETH funding rate turned negative, indicating short-term deleveraging. Consequently, demand for leverage on Ethereum dropped, though the trend later stabilized. By late August, minting strengthened again and the funding rate climbed back above zero, reflecting renewed market confidence.

September’s Market Fluctuations

Throughout September, minting and burning cycles alternated rapidly. Moreover, the ETH funding rate hovered slightly above neutral, showing cautious optimism. These alternating trends mirrored how traders adjusted to market swings. Additionally, minting volumes stayed stable for most of the month, with only brief contractions in supply.

In late September, funding rates dipped again, aligning with increased burning of USDe. The situation worsened in early October as both minted supply and funding rates fell sharply. By then, burned supply exceeded $1 billion, pushing the net USDe supply into negative territory

Simultaneously, the ETH funding rate dropped below –0.02, confirming growing bearish sentiment. Moreover, this dual decline revealed broad liquidation pressures and heavy risk reduction across Ethereum-linked markets.

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