Ethena Labs' High-Yielding Stablecoin Sparks Investor Concern Amid Rapid Growth
Summary:
Ethena Labs' new stablecoin, USDe, offering a 27.6% annual yield, has stirred concern within the crypto community due to its high yield. Some users fear potential yield inversion. As of now, Ethena has a total value locked at $297.9 million, and USDe's market cap increased by 20.6% in the last 24 hours. Critics endorse the querying of Ethena's design and yields as indicative of a healthier crypto industry.
Concerns over Ethena Labs' newly launched stablecoin's staking yield have sparked uproar among cryptocurrency investors on platform X. Ethena Labs introduced their Ethereum-based synthetic dollar, USDe, to the public mainnet on February 19, as documented by a post on X. Offering a yearly percentage yield (APY) of 27.6%, as stated on the Ethena Labs' website, this greatly surpasses the 20% yield offered by the Anchor Protocol on the UST of Terra Luna before its May 2022 downfall.
The allure of high yields has stirred unease within the crypto world. 0xngmi, a code contributor for DefiLlama who chooses to remain nameless, claims the true worry lies within the potential for yield inversion, not the high stablecoin yield of Ethena. He stated that yield inversion results in financial losses, with larger stablecoins losing more. Previous attempts to remedy this by closing short positions when the yield turned negative resulted in excessive costs, effectively eliminating any yield.
0xngmi further elaborated that Ethena substantially differs from the Anchor Protocol, which he condemns as a Ponzi scheme. Ethena has amassed a total value locked (TVL) of $297.9 million, with over 4,460 registered users, per its website. In the past 24 hours, the USDe's market cap soared by 20.6% to $291.93 million, as per DefiLlama statistics.
Angel investor and founder of The Daily Gwei, Anthony Sassano, said in a February 20 X post concerning Ethena's yield that this indicate a healthier state for the crypto industry than before, appreciating the questions being raised about Ethena's design and yield offerings as well as the exploration of underlying risks.
On February 16, Ethena Labs announced a $14 million funding intake supported by venture capital firm Dragonfly along with other investors. The company also previously garnered $6 million in 2023 from Binance Labs, Gemini, Bybit, Mirana Ventures, OKX Ventures, and Deribit to develop decentralized finance solutions on Ethereum.
This report will be updated with new information as it surfaces.
Published At
2/20/2024 3:08:44 PM
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