Euler Finance has erupted into a liquidity crisis, with users' funds of 7 million dollars trapped.

Under the continued impact of the Bear Market in the crypto world, Decentralized Finance (DeFi) has once again erupted into a chain crisis. Euler Finance has been shocked by a liquidity depletion, originating from a massive loss of 93 million dollars from Stream Finance, raising community awareness and further intensifying market turbulence.

Unable to withdraw coins: Users report funds trapped in Euler.

On November 5, 2025, a user named @Ryu_LCat shared his painful experience on X. He revealed that over 10 million dollars deposited in Euler Finance suddenly lost liquidity and he was unable to withdraw the full amount. The user pointed out that he could only withdraw 3 million dollars, while the remaining 7 million is still stuck on the platform.

According to their statement, the trigger for this crisis came from Stream Finance, where an external fund manager made an operational error, resulting in losses of up to 93 million dollars, further causing its stablecoin xUSD to plummet by 70%, decoupling from the US dollar. This massive shockwave quickly spread to multiple DeFi platforms, including Euler and Morpho, leaving many users' funds currently frozen.

(Balancer chain reaction? Stream Finance exploded with 93 million dollars in losses, xUSD decoupled and collapsed)

Euler Finance Emergency Response: Increase APY to Save Liquidity

In response to this liquidity crisis, Euler Finance issued an official statement on November 5, explaining the current response mechanism. Euler emphasized that the platform adopts a modular, non-custodial design, which means that the impact is limited to markets related to Stream Finance.

The statement indicated: “The impact of the Stream event will be limited to the markets with direct exposure.” To encourage borrowers to repay their debts and release more funds for withdrawal, Euler has raised the annual percentage yield (APY) to attract more new capital and stabilize the overall liquidity situation.

It is worth noting that Euler's DAO planning pools (such as Euler Prime and Euler Yield) have not been directly impacted and continue to operate normally.

DeFi market signals warning again: consecutive explosions reveal systemic risk

This crisis is not a singular event. Just a few days ago, on November 3rd, another major DeFi protocol, Balancer, also suffered a $70 million security vulnerability attack, once again sounding the alarm for the risks of Decentralized Finance.

Euler's announcement mentioned that while high APY may attract capital back, it also reflects rising market pressure and risks. “Raising interest rates is expected to encourage borrowers to repay or attract new deposits, gradually stabilizing market sentiment.”

However, many users, including @Ryu_LCat, are concerned about this “domino effect” and have stated that if the Bear Market continues, more similar incidents may occur in DeFi.

The community reacted enthusiastically: worried about the chain reaction spreading throughout the Decentralized Finance.

@Ryu_LCat's post quickly sparked heated discussions in the community. Many users shared their experiences of similar funds being stuck on platforms like Morpho and Lista, suggesting that this is not just an issue with individual protocols, but a reflection of the fragility of the entire Decentralized Finance system.

User @chinakkxl pointed out that Morpho is also facing a similar liquidity crisis, while @CatEyeLiberty questioned the safety of holding USDT in centralized exchanges. Another user, @lil687904, linked this incident to the recent hack of Balancer, warning that even mature platforms are no longer “safe.”

More comments bluntly state that this is a “systemic risk test” in the Bear Market. As user @zh520btc said: “On-chain finance is brewing a big thunder.”

Follow-up observation focus: Can Euler block the next domino?

Although Euler claims that the current risks are under control, the incident highlights the high interconnectivity between DeFi protocols, where crises can rapidly spread overnight. So far, the collateral related to Stream Finance involves up to $280 million in outstanding loans, distributed across multiple platforms such as Euler, Morpho, and Silo.

Currently, the law firm Perkins Coie LLP has intervened to investigate the Stream Finance incident, and the DeFi crypto world is holding its breath for further developments.

For users like @Ryu_LCat, the current situation is to “wait and see”. On one hand, they hope that high APY can bring capital back, while on the other hand, they worry that the next platform to explode could be where their assets are located.

(Bloodbath in Decentralized Finance: The Truth Behind the Collapse of Stream xUSD: The High-Risk Operations Behind the Illusion of Stablecoins)

This article about Euler Finance experiencing a liquidity crisis, with users' $7 million in funds trapped, first appeared on Chain News ABMedia.