• Dapps:16.23K
  • Blockchains:78
  • Active users:66.47M
  • 30d volume:$303.26B
  • 30d transactions:$879.24M

Concerns Arise Over Ethena Lab's Bitcoin-Backed USDe: Echoes of Terra-LUNA Incident

user avatar

by Giorgi Kostiuk

2 years ago


Ethena Lab recently announced its decision to use Bitcoin to back its synthetic dollar, USDe, instead of relying on traditional banking systems. This move has sparked worry among cryptocurrency experts due to the potential risks involved, reminiscent of the Terra-LUNA crisis.

Overlapping issues have been noted between Ethena Lab's approach and the Terra-LUNA incident when a stablecoin pegged to Bitcoin reserves resulted in market turmoil and insolvencies within the crypto community. CEO Ki Young Ju has cautioned against Ethena's strategy, particularly its plan to sell Bitcoin to stabilize USDe's peg during market downturns, which could have far-reaching consequences.

Ethena Labs aims to propel the growth of its USDe synthetic dollar, aspiring to increase its market capitalization from $2 billion to $10 billion by allowing users to acquire USDe through the deposit of various stablecoins such as USDT, FRAX, DAI, crvUSD, and mkUSD.

The USDe protocol introduced by Ethena Labs operates differently from conventional stablecoins, using derivative hedging against collateral positions and an arbitrage system to mint and redeem. Despite its innovative approach, concerns have been raised about its potential impact on the market. Following the news, Ethena's native coin ENA experienced a 9% drop in price within 24 hours, currently valued at $0.922. Additionally, Aave, a prominent DeFi platform, is considering discontinuing MakerDAO's DAI as collateral due to the risks associated with allocating a significant portion of DAI to USDe, raising further apprehensions among industry participants.

0

Rewards

chest
chest
chest
chest

More rewards

Discover enhanced rewards on our social media.

chest

Other news

Regulatory Bodies Monitor DeFi Developments

chest

The regulatory environment shows caution but is committed to monitoring DeFi developments.

user avatarKenji Takahashi

Ethereum Layer 2 Solutions Propel DeFi Growth

chest

Ethereum Layer 2 solutions, led by projects like Chainlink and Arbitrum, are enhancing infrastructure for improved DeFi performance.

user avatarDiego Alvarez

Animoca Brands Aims to Become Leading Altcoin Investment Vehicle

chest

Animoca Brands cofounder Yat Siu reveals plans to become a leading investment vehicle for altcoins and Web3 ecosystems, preparing for a public listing through a reverse merger next year.

user avatarRajesh Kumar

The Dichotomy of Small-Dollar Lending in the U.S.

chest

The consumer financial landscape in the U.S. is divided between the prime credit market and the subprime market, where payday loans serve around 12 million borrowers annually, often leading to a debt trap.

user avatarMiguel Rodriguez

The Role of Extended Payment Plans in Managing Payday Loan Debt

chest

Extended Payment Plans (EPPs) provide a solution for payday loan borrowers to manage debt through longer repayment terms without extra fees, yet their usage is low due to borrower unawareness and lender disincentives.

user avatarArif Mukhtar

Understanding the Debt Trap in Payday Lending

chest

The payday loan model often leads to a cycle of dependency, where borrowers find themselves trapped in a cycle of rollovers and high fees.

user avatarLuis Flores

Important disclaimer: The information presented on the Dapp.Expert portal is intended solely for informational purposes and does not constitute an investment recommendation or a guide to action in the field of cryptocurrencies. The Dapp.Expert team is not responsible for any potential losses or missed profits associated with the use of materials published on the site. Before making investment decisions in cryptocurrencies, we recommend consulting a qualified financial advisor.