In today’s The Tentacle, we explore the USD0++ depeg drama that shook DeFi this weekend. Usual Money’s abrupt redemption changes sent ripples through Morpho, Pendle, and beyond—trapping leveraged farmers, spiking interest rates, and raising eyebrows over MEV Capital’s role in the chaos. Is this a case of mismanagement, bad comms, a calculated play, or all three?

We break down the mechanics, the fallout, and what this means for DeFi’s future in our latest newsletter. Don’t miss it—stay informed, stay ahead.

Usual Protocol, a DeFi platform built around the USD0 / USD0++ stablecoin system and the USUAL governance token, triggered a sharp depeg of USD0++ over the weekend after abruptly changing redemption terms. Usual had initially offered a 1:1 on-chain exit path from USD0++ (a yield-bearing wrapper) into USD0, which many leveraged farmers were using as collateral or yield leg across protocols like Morpho and Pendle. The team then announced a new “alternative” redemption mechanism that allowed users to redeem USD0++ for USD0 at a manually set floor price of 0.87 instead of 1.00, while still earning USUAL rewards, effectively introducing a haircut to redemptions. Following the announcement, USD0++ traded materially below par (around $0.92 at one point), and the USUAL token itself fell nearly 19% over 24 hours. Because USD0++ was deeply integrated into DeFi, the depeg and policy change propagated quickly through the ecosystem. Positions that used USD0++ in leveraged strategies on Morpho and Pendle were suddenly marked down, trapping some farmers in illiquid or loss-making setups and contributing to spiking borrowing rates and forced deleveraging as users scrambled to adjust. The episode raised concerns about Usual’s risk management, communication, and governance, and it also focused attention on the role of MEV Capital, which had been a visible participant/liquidity provider around the strategy and was scrutinized by market participants trying to understand who benefited or lost during the chaos. Commentators now cite the USD0++ depeg as a case study in how abrupt parameter and redemption changes in ostensibly “stable” yield-bearing assets can transmit stress across multiple protocols, underscoring design, governance, and communication risks for DeFi’s next generation of stablecoin-like instruments.

✨ AI-generated background, compiled from web sources — not editorial content.

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• Usual protocol's depeg spurs instability in DeFi markets - Blockworks (blockworks.com)
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• [PDF] Stablecoins: A Deep Dive into Valuation and Depegging - S&P Global (spglobal.com)
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