Ethena Labs’ Move to Back USDe with Bitcoin Sparks Concerns
Ethena Labs has made headlines by announcing its intention to back its USDe synthetic dollar with Bitcoin.
However, this move has sparked concerns among some cryptocurrency experts, who fear it could destabilize the crypto market. One notable critic is CryptoQuant CEO Ki Young Ju, who likened the move to the Terra LUNA crisis.
Ju pointed out the risks associated with backing USDe with Bitcoin, citing the challenges faced by Terra-LUNA during its crisis, which resulted in market crashes and bankruptcies. He specifically highlighted the difficulty of maintaining a delta-neutral strategy for Bitcoin in bear markets, expressing concerns about Ethena Labs’ plan to sell Bitcoin to stabilize USDe’s peg during downturns.
This isn't good news for #Bitcoin holders—it sounds like a potential contagion risk, like LUNA. Correct me if I'm wrong. Is it a good news? https://t.co/LjPUUHq15f
— Ki Young Ju (@ki_young_ju) April 5, 2024
Ethena Labs, on the other hand, sees Bitcoin as a crucial asset to enable USDe to scale from its current $2 billion supply to a $10 billion market cap. Users are required to deposit stablecoins such as USDT, FRAX, DAI, crvUSD, and mkUSD to obtain USDe.
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Despite Ethena Labs’ optimistic outlook, crypto experts warn that USDe is not a traditional stablecoin and could yield positive or negative returns depending on market conditions. Additionally, concerns have been raised about the potential contagion risk posed by USDe, leading platforms like Aave to reconsider MakerDAO’s DAI as collateral.
Overall, while Ethena Labs sees Bitcoin backing as a means to drive growth, critics warn of potential market instability and contagion risks associated with USDe.
Alexander Stefanov
Reporter at CoinsPress
Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.
