The post Ethena Stablecoin’s 27% Yield is Triggering Terra-Induced PTSD appeared on BitcoinEthereumNews.com.

The startup’s token, USDe, is backed by staked ETH and ETH short positions. Synthetic stablecoin startup, Ethena Labs, is raising eyebrows after announcing it will offer over 20% yield on its USD-pegged token. Ethena’s Labs’s USDe stablecoin offers a 27% yield, and is available for the public since Feb. 19, when the mainnet and Etherena’s “Shard Campaign” went live. According to the team, users have the choice between staking USDe and receiving yield generated by the protocol from stETH and funding rates from short ETH positions, or accumulating so-called “shards,” which track and reward a user depending on how much they contributed to the ecosystem. Sharda are obtained by providing liquidity to Curve. The 20-plus yield on a stablecoin has triggered Crypto Twitter, as the pitch sounds similar to Terra’s UST algorithmic stablecoin, which lured investors with a 19% yield. In early May 2022, UST began to lose its peg, as LUNA, the token backing it, started to drop in value. The sharp drop in UST collateral prompted a death spiral which wiped out $50 billion in market capitalization over the course of three days. UST’s collapse seared into some crypto investors’ mind the old economic axiom, “there’s no free lunch.” So when Ethena erupted on the crypto scene with a Dragonfly-led $14 million-dollar seed round and its 27% yield, many were quick to ask where the yield came from. Where Does the Yield Come From? The “synthetic dollar,” said the firm, is collateralized with crypto assets–such as staked Ethereum (stETH)–and corresponding short futures positions on centralized exchanges. Ethena Labs is able to offer its high yield thanks to a blend of native staking returns, which sit at roughly 4%, and average funding paid to shorts, which currently sits at 23%. Ethena Website Guy Young, founder of Ethena Labs, points…

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Filed under: News - @ February 21, 2024 9:26 pm