Watch Out for New Trap! Stablecoin USDe Ethena Threatens Bitcoin with Terra-Like Collapse

Bittime - Crypto market analyst Young Ju warns that negative events in the past can be a harbinger of future events.

He points to the 2022 bear market triggered by the collapse of Terra (LUNA) and its algorithmic stablecoin UST as a prime example.

The poorly designed UST mechanism could not handle Bitcoin price fluctuations, leading to a “death spiral” and huge losses across the cryptocurrency market .

Deja Vu for Bitcoin?

CryptoQuant CEO Ki Young Ju expressed significant concerns over Ethena's recent announcement about adding Bitcoin (BTC) as collateral for its USDe stablecoin.

This move, which is very similar to Terra's strategy with UST, raises concerns of another potential collapse.

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Ethena and USDe Under Scrutiny

Ethena's (ENA) announcement boasts of Bitcoin becoming the underlying asset for USDe, promising significant growth.

However, Ki Young Ju highlighted the inherent risk – USDe's pegging mechanism relies on hedging delta derivatives against collateral, which is not completely insulated from the “contagion risk” witnessed in the Terra collapse.

Is USDe Ethena Another Time Bomb?

While Ethena claims USDe is different from UST (which directly uses Bitcoin (BTC) as the underlying asset), questions remain about its vulnerability.

Also Read: New Opportunities in the Crypto Market: Bitcoin Bullish, Meme Coin WIF Soars

Ethena argues that Bitcoin (BTC) offers better liquidity and scalability for delta hedging compared to Ethereum (ETH) staking tokens.

Additionally, they believe that the lack of Bitcoin (BTC) native staking yield is not very significant in a bull market.

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User Transparency and Caution

Ethena (ENA) promises a transparent reflection of BTC support positions on their dashboard. However, investors remain cautious, worried that a similar algorithmic stablecoin disaster could occur.

The article concludes by urging Bitcoin (BTC) investors to be wary of USDe Ethena and its potential impact on the market.

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Monitor price chart movements of Bitcoin (BTC) , Ethereum (ETH) , Solana (SOL) and other cryptos to find out today's crypto market trends in real-time on Bittime.

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DISCLAIMER: This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.