Ethena And ByBit Allow USDE Use As Derivative Trading Guarantee, Analysts Worry About New Risks

JAKARTA - Ethena Labs, a company that developed USDe's synthetic stablecoin, recently announced a strategic partnership with the ByBit crypto exchange. Through this partnership, traders can now use USDe as collateral in derivative trading. However, this decision also raises new concerns about potential risks that may arise.

USDE is a stablecoin that is different from most. Created by guaranteeing crypto assets such as Bitcoin and Ether, USDe has a unique mechanism to maintain its value stability. Ethena Labs performs short positions or bearish bets on guaranteed assets, so Bitcoin or Ether price fluctuations don't affect USDe value. With this new partnership, traders can use the USDe they have as collateral for derivative trading.

However, this step cannot be separated from criticism. The use of derivatives as collateral for further bets in the crypto market reminded Lido's STETH case in June 2022. Traders who use excessive leverage experience massive liquidation which causes the price of Ether to fall by more than 43%. Analysts believe that similar situations could occur if the crypto market experiences significant turmoil.

Ethena Labs tried to quell those concerns. Quoted from DL News, ConorRIDer, research chief of Ethena Labs, said the company had taken this risk into account by spreading bearish bets that support USDe on more than five different exchanges, including Binance, OKX, and ByBit. This strategy, according to Ryder, will help minimize the impact in the event of a problem on one of the exchanges.

In addition, asset diversification that supports USDe is also carried out to reduce risk. About 50% of USDE is guaranteed with Bitcoin, 30% with Ether, 11% with Ether liquid staking tokens, and 8% with stablecoin Tether (USDT). In this way, Ethena strives to ensure USDE stability despite unexpected market changes.

Despite risk mitigation efforts, skepticism persists. Some side compared USDe to TerraUSD, a stablecoin that underwent a spectacular failure in 2022. Austin Campbell, a professor at Columbia Business School, expressed his doubts about USDE's design that may not be ideal for long-term stability. In response to this, Guy Young, founder of Ethena Labs, stressed the importance of prudence in marketing products to users who may not fully understand the risks.