I followed a very interesting case that shows how a depegging event can turn into a snowball in DeFi protocols. The deUSD experienced a depegging back in October, which triggered cascading automatic liquidations across multiple protocols. MEV Capital took a significant hit from this — losses exceeding $100 million.

What stands out most is the size of the decline in MEV Capital’s AUM. It dropped from a peak of $1.5 billion to approximately $300 million in four months. That’s an 80% retracement, a quite severe drop even by industry standards.

What happened afterward is also revealing. Belem Capital, which was the initial invested capital managed by MEV Capital, decided to terminate the management mandate. More than that, Belem Capital internalized the institutional asset management team of the company to integrate its own risk and execution frameworks. Basically, they brought the expertise in-house.

This kind of situation is a reminder of how risks in DeFi can escalate quickly when automatic liquidations are involved. It’s not just a matter of poor performance; it’s how a depegging event can trigger a series of events that impact multiple assets and strategies simultaneously.