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CryptoQuant CEO Ki Younger Ju has voiced issues about Ethena’s latest choice 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 development or USDe since launch, Ethena hedges signify ~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 vital group 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 issues
Nevertheless, Ju was involved that Ethena’s BTC choice 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 preserve a delta-neutral technique for $BTC in bear markets? In bull markets, they maintain spot BTC and quick BTC. If there’s a way to quick BTC by holding some DeFi-wrapped BTC, the market dimension could 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 fallacious.”
Furthermore, Fantom creator Andre Cronje shared comparable apprehensions about Ethena. He questioned USDe’s security, highlighting lingering uncertainties regardless of his intensive assessment and evaluation of the asset.
Moreover, Cronje expressed issues about Ethena’s resilience in adversarial market situations, likening it to UST’s functioning, stating, “It really works till it doesn’t.”
Ethena’s pushback
Nonetheless, defenders of Ethena throughout the crypto group have emerged, offering explanations for its distinctiveness from Terra Luna.
Wintermute CEO Evgeny Gaevoy defined that there was no solution to be liquidated, and the one vital dangers have 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 development, additional defined the platform’s technique as an easy cash-and-carry commerce.
In line with him, the platform makes use of minted belongings to amass BTC, which is then used as collateral to shorten its unique worth in perpetual futures buying and selling. This method goals to offset BTC declines by growing 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 should you’re searching for a boogeyman, you’ll most likely have higher luck trying elsewhere.”