6 months ago
CryptoQuant CEO Ki Young Ju has voiced concerns astir Ethena’s caller determination to incorporated Bitcoin arsenic a backing plus for its USDe synthetic dollar.
On April 4, Ethena Labs revealed plans to onboard BTC arsenic a backing plus for USDe to make a safer merchandise for its users. The steadfast said:
“After the unprecedented maturation oregon USDe since launch, Ethena hedges correspond ~20% of ETH unfastened involvement arsenic of today. With $25 cardinal of BTC unfastened involvement readily disposable for Ethena to delta hedge, the capableness for USDe to standard has accrued >2.5x.”
USDe is simply a fast-rising “stablecoin” that has attracted important assemblage attention owed to its precocious yearly output of 37%. Notably, its marketplace capitalization has crossed the $2 cardinal people and it has scored adoption from major DeFi projects similar MakerDAO.
Community concerns
However, Ju was concerned that Ethena’s BTC determination poses “potential contagion risks” for Bitcoin holders portion drafting parallels with Terra Luna’s inclusion of the flagship integer plus arsenic collateral for its failed algorithmic UST stablecoin.
He questioned:
“How bash they support a delta-neutral strategy for $BTC successful carnivore markets? In bull markets, they clasp spot BTC and abbreviated BTC. If there’s a method to abbreviated BTC by holding immoderate DeFi-wrapped BTC, the marketplace size would beryllium smaller than its TVL.
Consequently, Ju concluded that USDe was “a CeFi stablecoin tally by a hedge fund, effectual lone successful bull markets. Correct maine if I’m wrong.”
Moreover, Fantom creator Andre Cronje shared akin apprehensions astir Ethena. He questioned USDe’s safety, highlighting lingering uncertainties contempt his extended reappraisal and appraisal of the asset.
Furthermore, Cronje expressed concerns astir Ethena’s resilience successful adverse marketplace conditions, likening it to UST’s functioning, stating, “It works until it doesn’t.”
Ethena’s pushback
Nevertheless, defenders of Ethena wrong the crypto assemblage person emerged, providing explanations for its distinctiveness from Terra Luna.
Wintermute CEO Evgeny Gaevoy explained that determination was nary mode to beryllium liquidated, and the lone important risks were related to custody and execution. He said:
“You are agelong stETH, abbreviated ETH perp (and usage stETH arsenic collateral for perp position). You cannot beryllium liquidated. Key risks present are custody/execution related.”
Wintermute is an capitalist successful the protocol.
Seraphim Czecker, Ethena’s caput of growth, further explained the platform’s strategy arsenic a straightforward cash-and-carry trade.
According to him, the level uses minted assets to get BTC, which is past utilized arsenic collateral to shorten its archetypal worth successful perpetual futures trading. This attack aims to offset BTC declines by expanding perp positions accordingly.
Additionally, Ryan Watkins, the co-founder of crypto hedge money Syncracy Capital, chimed in that those spreading FUD astir Ethena astir apt conscionable person terrible PTSD from UST. He added:
“Of people determination are risks arsenic is the lawsuit with immoderate caller protocol, but if you’re looking for a boogeyman, you’ll astir apt person amended luck looking elsewhere.”
The station Experts interest Ethena’s Bitcoin-backing strategy for USDe could bring ‘contagion risks’ appeared archetypal connected CryptoSlate.
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