Ethena Labs introduced to again its USDe artificial greenback with Bitcoin and a few crypto consultants have raised purple flags on the transfer as it could crash the crypto market. Among these consultants, on-chain knowledge platform CryptoQuant CEO stated USDe backed by Bitcoin raises dangers of a possible Terra LUNA-like disaster.
CryptoQuant CEO Red Flags Ethena Backing USDe With Bitcoin
Ki Young Ju, founder and CEO of CryptoQuant, stated Ethena onboarding Bitcoin as a backing asset to USDe isn’t excellent news for Bitcoin holders.
He believes backing USDe with Bitcoin dangers a possible contagion just like LUNA. Terra-LUNA maintained a peg for UST stablecoin via Bitcoin reserves on the Luna Foundation Guard (LFG), which was offered to keep up the peg. The Terra-LUNA disaster crashed the crypto market and triggered bankruptcies for a number of crypto corporations reminiscent of crypto hedge fund Three Arrows Capital.
CryptoQuant CEO particularly identified the problem in sustaining delta-neutral technique for BTC in bear market. In bull market, Ethena Labs plans to carry spot BTC and quick BTC as a part of money and carry commerce. He added that promoting BTC to stabilize USDe’s peg if their algorithm fails throughout bear markets is an enormous concern for him.
“If there’s a method to short BTC by holding some DeFi-wrapped BTC, the market size would be smaller than its TVL. This is a CeFi stablecoin run by a hedge fund, effective only in bull markets. Correct me if I’m wrong,” stated Ki Young Ju.
Every so usually we see one thing new on this area. I usually discover myself on the mid curve for an in depth period of time. I’m snug right here. That being stated, there have been occasions on this business I want I used to be extra interested by, there have additionally been occasions I undoubtedly did…
— Andre Cronje (@AndreCronjeTech) April 3, 2024
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Ethena’s USDe Synthetic Dollar
Ethena Labs claims the essential Bitcoin unlock to allow USDe to scale considerably from the present $2 billion provide to $10 billion market cap. Users must deposit stablecoins reminiscent of USDT, FRAX, DAI, crvUSD, and mkUSD to get Ethena’s USDe.
Meanwhile, it generates a yield of 37% by shorting Ethereum (ETH) futures and pocketing funding charges. Crypto consultants warn USDe is a brand new protocol and never a stablecoin and will have a constructive or unfavorable yield based mostly in the marketplace situations.
In reality, Aave plans to drop MakerDAO’s DAI as collateral after MakerDAO proposed allocating 1 billion DAI stablecoin, practically 20% of its whole provide to USDe. AAVE chan founder Marc Zeller believes there’s a main contagion threat
Ethena (ENA) value fell 9% within the final 24 hours, with the value presently buying and selling at $0.922.
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