Charles Edwards, the founder of Capriole Investments, has sparked significant interest and debate within the cryptocurrency community. He heralded Ethena (ENA) as “the Luna of this cycle,” but with a crucial difference: its economic fundamentals are deemed sustainable.
Edwards elaborated, “It’s 100% collateralized and the yield is variable based on market forces. Two things Luna wasn’t.” He also noted that at its zenith, Luna’s valuation exceeded ENA’s current market cap by more than twenty-fold, yet he cautioned, “ENA is not risk-free, custody and execution risk exist.”
Ethena is the Luna of this cycle, except the underlying economics are actually sustainable. It’s 100% collateralized and the yield is variable based on market forces. Two things Luna wasn’t. At it’s peak LUNA was over 20X bigger than what ENA is now. ENA is not risk free, custody…
— Charles Edwards (@caprioleio) April 10, 2024
Since its launch on April 2, ENA has seen a meteoric rise from under $0.30 to a high of $1.45. This rally is largely attributed to Ethena Labs’ strategic enhancement of its rewards program, now in its “Season 2,” which offers a 50% reward boost for users locking their ENA tokens for at least seven days. This move aims to bolster user engagement and loyalty, fostering a sustainable ecosystem for the Ethena platform.
A remarkable aspect of this ecosystem is the rapid growth of its stablecoin, USDe, which has outstripped the supply growth of established counterparts such as USDT, USDC, and DAI, reaching a $2 billion supply in just over 100 days.
USDe is the fastest growing USD denominated asset in the history of crypto pic.twitter.com/xgiRJjf96t
— G | Ethena (@leptokurtic_) April 8, 2024
However, the project’s high yields which are generated by harnessing the derivative markets and staked Ethereum have stirred skepticism among industry experts. Fantom founder Andre Cronje, among others, has raised concerns about the sustainability of these yields, which are the highest in the entire crypto industry.
Risks Involved With Ethena
Diving deeper into the discussion of risks, CL (@CL207) from eGirl Capital offers an intriguing perspective on the behavior of derivatives traders. She clarifies, “It appears Ethena is making many people who don’t trade derivatives have a really hard time wrapping their heads around the fact that derivatives traders are so genuinely retarded that we’re willing to pay like…
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