Ethereum Updates: DeFi Faces Widespread Threats as Gauntlet Recommends Urgent Market Suspension

DeFi analytics company Gauntlet has

the borrowing of , USDS, and on Ethereum’s v3 platform, citing a liquidity emergency involving Elixir’s deUSD and sdeUSD tokens. Announced on November 5, this action seeks to limit further damage as these tokens—used as collateral in the impacted markets—have experienced sharp declines in value. Gauntlet’s recommendation is to freeze withdrawals and new loans until risk parameters are revised and approved by governance, though the proposal is still awaiting formal adoption.

The urgency follows a

at Stream Finance, a DeFi platform focused on yield, which revealed the incident after an external fund manager exposed the deficit. Stream’s stablecoin, , quickly . The downfall was linked to Elixir’s deUSD and sdeUSD, which lost over 70% of their value, setting off a cascade of effects across related protocols. In response, Stream Finance has and has brought in law firm Perkins Coie to conduct an investigation.

Gauntlet’s proposal draws attention to the systemic dangers of recursive DeFi tactics, where leveraged trades and unclear fund management can magnify risks. The firm pointed out that the price feeds for deUSD and sdeUSD were artificially high, enabling users to borrow against collateral at values well above the real market price—a major vulnerability that fueled the crisis. “Pausing these markets is the only way to stop further withdrawals that could destabilize the system, at least until governance approves new risk parameters,” a Gauntlet spokesperson said, as posted on the

.

This action has stirred discussion in the DeFi space. Many see the pause as a necessary safeguard, while some critics argue it could erode trust if prolonged. “Every hour these markets are frozen chips away at confidence in Compound’s liquidity assurances,” one forum user commented. Others stressed the importance of more rigorous collateral screening, especially for major stablecoin pools.

The incident highlights deeper weaknesses in DeFi’s rapid growth. Just days earlier, the automated market maker

suffered a $100 million hack, adding to concerns about protocol safety. Analysts such as Omer Goldberg from Chaos Labs connected the two events, suggesting the Balancer exploit may have sped up capital outflows from riskier protocols.

Currently, the

stablecoin markets are in a fragile position. Gauntlet has called for swift governance decisions to update supply limits and restart activity, but no schedule has been announced. Meanwhile, users remain uncertain as platforms like Yei Finance and also contend with unusual market behavior. Further analysis, including a comprehensive report on the situation and its repercussions, has been published in outlets such as .