A relatively new cryptocurrency project named Ethena is gaining notice for its innovative strategy that resembles hedge fund investing. This approach has resulted in substantial investments and excitement within the industry. The initial returns, approximating 37%, have been enticing. However, doubts about the long-term viability of Ethena are emerging due to the unpredictable nature of the crypto market.
According to an article published by Bloomberg News on the previous day, Ethena unveiled the USDE (USD Eterna) token. By employing a well-known strategy in crypto communities called cash-and-carry, this new token takes advantage of price discrepancies between spot and futures markets. This tactic has gained popularity due to surging token prices and escalating funding rates.
The Bloomberg article pointed out the dangers linked to Ethena’s high yields, using past market turbulences such as the TerraUSD incident in 2022 as a reference. This analogy heightens fears about the risks involved in Ethena’s approach within the volatile crypto sector.
Based on Bloomberg’s report, Ethena functions by enabling traders to create USDe tokens via an automated system, utilizing deposits of stETH and other tokens. Ethena Labs intelligently places short positions on various exchanges to profit from elevated funding rates, showcasing a profitable strategy in the present bullish market scenario.
Bloomberg spotlights Ethena’s goal of developing a decentralized cryptocurrency that delivers both stability and alluring returns, setting it apart from the crowded stablecoin sector predominantly ruled by asset-backed tokens.
The Bloomberg article highlights Ethena’s impressive growth, boasting over $2 billion in cryptocurrency deposits, making it distinct from past efforts to regulate token values through basis trades. This expansion is a clear indication of the robust market interest in lucrative investments, following the 2022 collapse of lenders.
Ethena’s substantial earnings, totaling over $25 million in sales during March as reported by Bloomberg, highlight its achievement. Yet, doubts persist regarding the strategy’s durability amidst unfavorable market situations. The risks associated with funding rate changes and the volatility of collateral, specifically stETH, underscore potential challenges.
According to Bloomberg, Ethena strives to make complex trading strategies, usually only accessible to professional firms, available to individual investors. By doing so, this initiative aims to increase transparency in trading processes and lessen reliance on opaque intermediaries.
Although Bloomberg acknowledges Ethena’s accomplishments, it also highlights Ethena’s openness about potential risks, encompassing financing and exchange hazards as well as the utilization of external custodians. In comparison to past initiatives, this frank disposition signifies a sophisticated take on risk management.
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2024-04-11 10:49