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Reported by Cointelegraph, Ccryptocurrency investors took to X to express their concern about the staking yield of Ethena Labs’ newly launched stablecoin.
Ethena Labs launched its USDe stablecoin on the public mainnet on Feb. 19, according to an X post from the company’s official page. The USDe Ethereum-based synthetic dollar currently offers a 27.6% annual percentage yield (APY), according to Ethena Labs’ homepage. This is considerably higher than the 20% yield offered by Anchor Protocol on Terra’s UST before the algorithmic stablecoin issuer Terra collapsed in May 2022.
The attractive yield opportunity caused widespread concerns in the crypto community. According to 0xngmi, a pseudonymous DefiLlama code contributor, the real concern is a potential yield inversion, not Ethena’s high stablecoin yield. He wrote:
“When yields invert you start losing money, and the bigger the stablecoin is the more money it loses… Previous projects tried to [close the short positions when yield turned negative], but opening/closing positions has a cost, and that ate into all yield.”
In a subsequent reply to the thread, 0xngmi highlighted that Ethena is “completely different” from Anchor Protocol, which he categorized as a Ponzi scheme.
According to Eitan Katz, the co-founder and CEO of decentralized money transfer protocol Kima, maintaining such high yields will be difficult in a bear market, which might force Ethena to lower its yield in the future. He said: “[USDe’s] sustainability mostly depends on continuous market growth and the ability to manage risks effectively – and if done right, these can provide stability, although in the crypto industry, it is very unlikely.”
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