Yearn analyzes Stream Finance collapse from circular leverage

Yearn published a thread breaking down the collapse of Stream Finance, which lost hundreds of millions to circular leverage. Depositors saw $520M TVL at 12-18% stablecoin APY in October 2025, but only $160M actually existed; DeFiLlama refused to count the loops and showed ~$200M. Stream held ~90% of Elixir's deUSD supply, which was itself backed by Stream's xUSD token.

Yearn notes the loop failed to unwind cleanly because Stream suspended redemptions, lending markets hit 100% utilization freezing withdrawals, and oracles hardcoded xUSD at $1 so liquidations never fired, creating bad debt. It also flags that multiple risk curators were exposed to the risky protocols, leaving users who trusted them holding the bag.