Ethena Labs’ Decision
Ethena Labs has added Bitcoin (BTC) as collateral for its USDe product. This aims to increase USDe’s supply from $2 billion to leverage the growing BTC derivative market. Ethena believes this will enhance scalability and liquidity for delta hedging.
CryptoQuant CEO’s Concerns
Ki Young Ju, CEO of CryptoQuant, has expressed concerns about the move. He compares it to the LUNA collapse, questioning how Ethena Labs will manage delta-neutral strategies in bear markets. Ju suggests that shorting BTC in bear markets could be challenging due to a smaller market size than the total value locked (TVL).
Industry Reactions
Some industry experts have welcomed Ethena’s decision, while others have raised concerns. OMAKASE, a former advisor for Sushiswap, highlights the risks of delta-neutral strategies becoming illiquid and difficult to unwind.
Ethena Labs’ Response
Ethena Labs defends its decision, citing favorable market conditions and the growth of BTC derivative markets. They believe that the move will not only scale USDe but also make it safer and more robust.
Conclusion
The industry is divided on Ethena Labs’ decision to use BTC as collateral for USDe. Some see it as a potential risk, while others believe it will enhance scalability and liquidity. Only time will tell if Ethena Labs’ strategy will succeed or if it will lead to a LUNA-like collapse.
