The Ethena Protocol (ENA), creator of the synthetic dollar stablecoin USDe, has surged past the $2 billion mark in total value locked (TVL). This notable expansion occurs amid skepticism from experienced industry analysts, echoing worries akin to the Terra (LUNA) incident.
Industry Experts Express Doubts Regarding Ethena’s USDe
According to DefiLlama’s data, as of April 1, Ethena’s TVL was $1.54 billion. In merely four days, it has swiftly surpassed the $2 billion milestone, marking a growth of approximately 30%. This notable surge underscores the increasing investor enthusiasm towards Ethena’s offerings.
The protocol’s appealing 27% Annual Percentage Yield (APY) and its recent ENA token airdrop undoubtedly allure investors. Ethena’s airdrop on April 2 distributed a generous 750 million tokens to eligible users.
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This announcement follows another noteworthy development from MakerDAO, the overseer of the DAI stablecoin, which is considering a significant allocation of 600 million DAI towards USDe through Morpho Labs.
Ethena’s surge is bolstered by substantial support from notable investors such as Delphi Digital, Wintermute, and Galaxy Digital. This endorsement adds a perceived layer of credibility to the platform.
However, Ethena’s rapid growth has not been without cautionary remarks. DeFi luminary Andre Cronje expressed concerns about USDe potentially encountering a collapse similar to the TerraUSD (UST) incident. Cronje’s apprehensions revolve around Ethena’s use of perpetual contracts and its reliance on yield-based collateral.
Ki Young Ju, the founder of CryptoQuant, echoed Cronje’s warning, particularly focusing on Ethena’s announced intentions to incorporate Bitcoin (BTC) as a backing asset for USDe. He questions Ethena’s ability to maintain a delta-neutral BTC strategy during bear markets.
It’s noteworthy that Anchor Protocol offered around a 20% Annual Percentage Yield (APY) on UST, implying that USDe’s APY is even higher than UST’s.
Despite these critical opinions, USDe has ascended to become the fifth-largest stablecoin by market capitalization. Ethena’s native token, ENA, has experienced a remarkable price surge from $0.62 to $1.25 in less than two days following the successful airdrop. However, at the time of writing, ENA is trading at $0.99.