Is the Ethena USDe doomed? "2
CryptoQuant has identified two key indicators for predicting the future of Ethena USDe.
Ethena USDe maintains a delta-hedged peg to the dollar, which differentiates it from traditional stablecoins.
Julio Moreno emphasizes the importance of controlling reserve fund size and custody rates due to funding risk.
Effective management of these metrics is crucial to prevent the collapse faced by UST #Terra .
Ethereum's USDe Ethene, a synthetic USD protocol on #BTC , is rapidly gaining popularity and has a market value of over $2 billion.
Unlike traditional stablecoins, USDe is not backed by physical USD or #cryptocurrencies . Instead, it is pegged to the dollar through a sophisticated delta hedging strategy using cryptocurrencies as collateral.
Julio Moreno, head of research at CryptoQuant, discussed the innovative but risky strategy behind USDe. By hedging spot #cryptocurrency exposure through short positions in open-ended futures, USDe generates profits in "normal" market conditions. However, this approach exposes the company to unique risks, particularly funding risk.
Funding risk becomes important in volatile markets where negative funding rates can occur. This means that USDe holders may find themselves having to make significant payments to maintain positions.
In an exclusive report provided by BeInCrypto, Moreno outlines two important metrics for investors: the size of the reserve fund relative to the market value of USDe and the maintenance ratio - the portion of profits reinvested in the reserve fund.
Payments to the reserve fund increase as the market value of USDe increases (because the short position also increases).
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