The recent flash crash didn’t just rattle the market — it revealed which systems were built for chaos and which ones were only built for charts. In the middle of one of the largest liquidation waves in crypto history, sUSD1+ OTF from Lorenzo Protocol ended up doing exactly what it was created to do. While almost every corner of DeFi was struggling to stay upright, depositors in the fund collected steady yield, finishing the week with a roughly 50% seven-day APY and about 1.1% per day during the worst of the selloff.
The crash itself was brutal. President Trump’s sudden announcement of 100% tariffs on China kicked off a chain reaction. Within hours, nearly $20 billion in leverage evaporated. Long positions were stacked too aggressively, liquidity disappeared in seconds, and liquidation engines across exchanges fed off each other. Bitcoin fell from above $125k to below $113k; Ethereum, XRP, and Solana all plunged. In total impact, this event was more damaging than the FTX collapse and the COVID crash combined.
Moments like this aren’t just about price going up or down. They expose the hidden mechanics — liquidity gaps, oracle slippage, stuck transactions, funding rates flipping violently. These are exactly the environments Lorenzo targets when building products meant to function even when the market stops behaving rationally.
sUSD1+ OTF is their flagship example. It’s the first yield vehicle for USD1 holders and the first On-Chain Traded Fund in the Lorenzo ecosystem. Since appearing on testnet in July, it has gathered more than $80 million from almost 30,000 depositors, normally offering weekly yields in the 7–12% range. But the crash was its first real trial under extreme pressure.
Where other basis-trading “delta neutral” products collapsed under volatility — failing to execute, losing neutrality, or getting liquidated — sUSD1+ OTF stayed intact. The system converted the sharp movements into income instead of risk. Depositors kept their principal, the strategy didn’t slip out of balance, and the NAV rose as price differentials and capital fees were captured throughout the event.
Users didn’t have to do anything. Their sUSD1+ OTF balances didn’t change; the value simply increased as the fund absorbed the volatility into revenue.
Part of the resilience comes from the team’s background. Several of Lorenzo’s core members come from quantitative trading environments like Jump Trading and Two Sigma. Instead of designing strategies that rely on predicting direction, they structured the product to harvest consistent return streams — market-making dividends, basis fees, capital fees, and term structure optimization — all packaged into a daily-operating OTF model.
The performance wasn’t luck. It was the result of system engineering meant to protect principal during stress and deliver stable yield during calm periods.
Now that the product has passed a real-world stress test, it serves as a template for a broader lineup of OTF products across major assets, stables, real-world assets, and mixed portfolios. Piece by piece, Lorenzo is building toward a larger vision: an on-chain, modular income ecosystem that behaves more like a modern investment bank than a typical DeFi protocol.
The lesson from the crash is straightforward: neutral positioning alone isn’t enough when market plumbing breaks. What matters is execution under pressure — and Lorenzo Protocol is one of the few teams designing with that reality in mind.
