Cryptocurrency investors voiced their concerns on X regarding the staking yield of Ethena Labs’ newly launched stablecoin.
On February 19, Ethena Labs unveiled its USDe stablecoin on the public mainnet, boasting a 27.6% annual percentage yield (APY) for the Ethereum-based synthetic dollar, a substantial increase compared to the 20% yield offered by Anchor Protocol on Terra’s UST before Terra’s collapse in May 2022.
The enticing yield opportunity sparked widespread apprehension within the crypto community.
Pseudonymous DefiLlama code contributor, 0xngmi, highlighted the potential risk of yield inversion, stating, “When yields invert you start losing money, and the bigger the stablecoin is the more money it loses.”
0xngmi also noted the cost implications of managing short positions when yields turn negative. In a subsequent reply, 0xngmi distinguished Ethena from Anchor Protocol, labelling the latter as a Ponzi scheme.
Eitan Katz, co-founder and CEO of decentralised money transfer protocol Kima, expressed skepticism about sustaining such high yields during a bear market, foreseeing potential yield reductions by Ethena.
Katz emphasised the necessity for continuous market growth and effective risk management for USDe’s sustainability, acknowledging the unpredictability inherent in the crypto industry.
Ethena reported a total value locked of $297.9 million and over 4,460 users on its homepage.
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Meanwhile, USDe’s market cap surged by 20.6% in the past 24 hours to $291.93 million, as per DefiLlama data.
Cointelegraph sought comment from Ethena Labs regarding the concerns raised.
Anthony Sassano, angel investor and founder of The Daily Gwei, regarded the investor scrutiny surrounding Ethena’s yield as a positive development for the crypto industry.
Sassano applauded the increased questioning of Ethena’s design and the exploration of underlying risks, contrasting it with the previous cycle where such questioning was dismissed.
Ethena Labs disclosed raising $14 million in funding on February 16, with backing from venture capital firm Dragonfly and others.
The firm had previously secured $6 million in 2023 from various investors to develop decentralised finance solutions on Ethereum.
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