- Ethena Labs has integrated Bitcoin as a backing asset for USDe stablecoin.
- The founder of CryptoQuant argued that the decision may not benefit BTC holders.
- He recalled a potential contagion risk similar to what was witnessed with Terra Luna’s UST.
Ki Young Ju, the CEO of data analytics platform CryptoQuant, raised concern about Ethena Labs’ decision to back its recently launched USDe stablecoin with Bitcoin.
In an announcement on Thursday, Ethena Labs revealed that Bitcoin (BTC) has been integrated as a backing asset for USDe. This means that Bitcoin now serves as collateral to uphold the peg of the synthetic dollar stablecoin to the U.S. dollar.
The team emphasized that shifting to BTC-backed positions marks allows USDe to expand substantially from its current $2 billion supply. However, Ki Young Ju has argued that the decision may not benefit Bitcoin holders. He expressed apprehension, likening it to a potential contagion risk similar to what was witnessed with Terra Luna’s ill-fated UST stablecoin in 2022.
Notably, the Terra team repeatedly sold Bitcoin to support UST amid losing its $1 peg, which significantly impacted Bitcoin’s price. The founder of CryptoQuant fears the potential for a similar scenario recurring with USDe.
Furthermore, Young Ju questioned how Ethena Labs plans to maintain a delta-neutral strategy for Bitcoin during bear markets. He pointed out that in bull markets, they hold spot BTC and short BTC.
The industry pundit emphasized that the USDe stablecoin appears to be a Centralized Finance (CeFi) initiative run by a hedge fund, which he noted is effective only in bull markets. Young Ju fears for the stability of USDe’s peg if their algorithm fails during bear markets.
Notably, USDe has experienced a remarkable expansion in recent months. It has become the fifth-largest USD-pegged stablecoin with a market cap exceeding $2 billion. Over the past 30 days alone, the supply of USDe has surged by 156%. Presently, the annual percentage yield (APY) stands at 37.1%, having reached highs surpassing 60% APY.
Besides, Ethena Labs has introduced a governance token, ENA, which currently commands a market valuation of $1.61 billion.
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