Compound Resumes USDC and USDS Lending Amid Liquidity Crisis

Key Points:* Compound lifts restrictions on USDC, USDS lending following proposal from Gauntlet.

• Resumption aimed to stabilize market liquidity post-$93 million loss debacle.
• Elixir’s collateral fall underscores compounded risk vulnerabilities. Compound, influenced by Gauntlet’s recommendation, reinstated some lending services on November 6 after pausing them due to Elixir’s deUSD and sdeUSD liquidity issues.

The resumption intends to stabilize market operations and address investment losses, stemming from a liquidity crunch impacting key stablecoins, and meet risk management requirements.

Compound Resumes USDC, USDS Lending After $93 Million Impact

Compound resolved to temporarily halt lending markets for USDC, USDS, and USDT following Gauntlet’s recommendation. Gauntlet cited concerns over Elixir’s collateral, introducing a risk of cascading liquidity issues. Stream Finance’s exposure led to the identification of significant vulnerabilities surrounding deUSD and sdeUSD. The decision to pause interactions aimed to reinforce risk controls while allowing continued deposit and repayment actions.

In lifting the pause partially, the protocol moved to cautiously resume withdrawals of USDC and USDS. Compound stated its strategy involves carefully evaluated risk measures, as community governance forums engage with risk analysis discussions.

Due to concerns surrounding Elixir, Gauntlet has observed a liquidity crunch in both deUSD and sdeUSD. Both tokens are listed as collateral on Ethereum USDC, Ethereum USDS, and Ethereum USDT. Gauntlet has already recommended risk parameter updates (Tally). However, these have yet to pass through Governance. – Gauntlet Risk Management Team, Analyst, Gauntlet (source)

DeFi’s Liquidity Risk Under Spotlight Amid Market Fluctuations

Did you know? Previous oracle desyncs have prompted similar crisis management actions, drawing parallels with other DeFi incidents where stablecoin depegs necessitated emergency protocol responses.

CoinMarketCap data for USDC reveals a circulating supply of 75.45 billion with a 24-hour trading volume of “18.51 billion,” marking a 4.76% change. Despite market fluctuations, prices remain stable around the “0.99996” mark, maintaining market confidence. Pivotal changes over 90 days show minimal volatility at -0.01%, reflecting market steadiness amid broader tensions.

USDC(USDC), daily chart, screenshot on CoinMarketCap at 02:06 UTC on November 7, 2025. Source: CoinMarketCap Insights from the Coincu research team suggest that the proper response to collateral liquidity events is continued governance and risk parameter adjustment to enhance resilience against future shocks. This analysis emphasizes a deepened focus on technological risk management and protocol fortification across DeFi ecosystems.