CryptoQuant CEO Ki Younger Ju has voiced considerations about Ethena’s current resolution to include Bitcoin as a backing asset for its USDe artificial greenback.
On April 4, Ethena Labs revealed plans to onboard BTC as a backing asset for USDe to create a safer product for its customers. The agency mentioned:
“After the unprecedented progress or USDe since launch, Ethena hedges symbolize ~20% of ETH open curiosity as of immediately. With $25 billion of BTC open curiosity available for Ethena to delta hedge, the capability for USDe to scale has elevated >2.5x.”
USDe is a fast-rising “stablecoin” that has attracted important neighborhood consideration because of its excessive annual yield of 37%. Notably, its market capitalization has crossed the $2 billion mark and it has scored adoption from main DeFi tasks like MakerDAO.
Group considerations
Nonetheless, Ju was involved that Ethena’s BTC resolution poses “potential contagion dangers” for Bitcoin holders whereas drawing parallels with Terra Luna’s inclusion of the flagship digital asset as collateral for its failed algorithmic UST stablecoin.
He questioned:
“How do they keep a delta-neutral technique for $BTC in bear markets? In bull markets, they maintain spot BTC and quick BTC. If there’s a technique to quick BTC by holding some DeFi-wrapped BTC, the market dimension can be smaller than its TVL.
Consequently, Ju concluded that USDe was “a CeFi stablecoin run by a hedge fund, efficient solely in bull markets. Right me if I’m incorrect.”
Furthermore, Fantom creator Andre Cronje shared comparable apprehensions about Ethena. He questioned USDe’s security, highlighting lingering uncertainties regardless of his in depth evaluation and evaluation of the asset.
Moreover, Cronje expressed considerations about Ethena’s resilience in adversarial market circumstances, likening it to UST’s functioning, stating, “It really works till it doesn’t.”
Ethena’s pushback
However, defenders of Ethena inside the crypto neighborhood have emerged, offering explanations for its distinctiveness from Terra Luna.
Wintermute CEO Evgeny Gaevoy defined that there was no method to be liquidated, and the one important dangers had been associated to custody and execution. He mentioned:
“You might be lengthy stETH, quick ETH perp (and use stETH as collateral for perp place). You can’t be liquidated. Key dangers listed below are custody/execution associated.”
Wintermute is an investor within the protocol.
Seraphim Czecker, Ethena’s head of progress, additional defined the platform’s technique as a simple cash-and-carry commerce.
In response to him, the platform makes use of minted property to accumulate BTC, which is then used as collateral to shorten its authentic worth in perpetual futures buying and selling. This strategy goals to offset BTC declines by rising perp positions accordingly.
Moreover, Ryan Watkins, the co-founder of crypto hedge fund Syncracy Capital, chimed in that these spreading FUD about Ethena most likely simply have extreme PTSD from UST. He added:
“In fact there are dangers as is the case with any new protocol, however if you happen to’re searching for a boogeyman, you’ll most likely have higher luck wanting elsewhere.”
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