ENA's market value surpasses 1 billion dollars, but some are worried it is creating the next black swan

Written by: Rhythm Little Worker

Yesterday, the hottest topic in the DeFi space was perhaps the Ethena airdrop. After the open airdrop token claim, Binance's wealth management, flash exchange, leverage, and contracts launched Ethena (ENA), with over 19 million BNB invested in the first hour. The ENA token surged over 30% in just one day, directly entering the billion-dollar market cap club.

Following that, Ethena announced the launch of the second quarter "Sats" event Epoch 1, where users can deposit USDe to earn Sats. The new Pendle pool on Mantle has a cap of $100 million and will earn additional Eigenlayer points. The existing USDe Pendle pool on the ETH mainnet also has a cap of $100 million, and current users depositing funds into the pool will receive a 20% bonus.

MakerDAO founder Rune Christensen (@RuneKek) deposited 5.66 million USDT into Ethena 16 hours ago and minted 5.655 million USDe, marking Rune's first participation in Ethena. Moreover, MakerDAO is considering allocating 600 million DAI to USDe and staking USDe (sUSDe) through the DeFi lending protocol Morpho Labs.

However, just as everything seemed to be going smoothly, some differing voices emerged within the community. Aavechan founder Marc (@lemiscate) tweeted criticism of certain reckless DeFi practices, particularly pointing out the $100 million DAI, which accounts for 20% of its total supply, being put into "an untested" protocol (Ethena) without any risk mitigation measures, especially after recent issues with weak oracles. Marc believes that this handling of assets highly susceptible to market conditions is extremely reckless and announced he would propose lowering the DAI loan-to-value ratio at Aave.

We all know that in the cryptocurrency space, stablecoins are regarded as one of the most important tools. Whether on centralized or decentralized trading platforms, whether in spot or futures markets, most transactions are priced in stablecoins. Stablecoins have completed over $12 trillion in on-chain settlements, becoming one of the top five assets in the DeFi space, accounting for over 40% of the total value locked (TVL), making them the most widely used asset in decentralized currency markets to date.

As a stablecoin, USDe aims to provide scalability by leveraging derivatives to enhance capital efficiency. Under Ethena's design, USDe can scale while maintaining capital efficiency, as the staked ETH assets can achieve perfect hedging through equivalent short positions, thus requiring only a 1:1 "staking" to create synthetic dollars.

Marc also made an analogy to explain the importance of risk management when using USDe: if you add 5 cl of gin to a cocktail, it might lead to a wonderful night; but if you drink 3 bottles of gin, you might end up "with the toilet," emphasizing the importance of proper risk management and setting reasonable limits in DeFi projects.

"ENA/USDe, smells like LUNA/UST"

Analyst Duo Nine (@DU09BTC) further pointed out that MakerDAO is "printing money for free," which may ultimately cost ordinary investors: "They issued 100 million DAI, which can only be borrowed by using USDe/sUSDe as collateral. It's a huge cost for users, while Maker makes massive profits, with an annualized yield of 66% on 100 million!"

In Duo Nine's view, the decoupling of USDe is only a matter of time. The larger this bubble grows, the greater the likelihood of this happening. The rapid growth of Ethena could pose systemic risks to everyone. Particularly, USDe has not been tested in a bear market, and once it involves billions of dollars, the risks become especially prominent.

"MakerDAO is exploiting the greed of users pursuing higher annualized yields on USDe. They don't care; they will use billions to fuel this greed. Maker reaps huge profits, while the market cap of USDe continues to soar," Duo Nine pointed out a potential trap in his tweet: the market cap of USDe is about $10 billion, of which $2 billion is Maker's liability. If USDe decouples, panic and liquidations will begin, and Maker will be the first to sell USDe and recover funds to maintain their profits and principal, while those borrowing DAI with USDe and sUSDe on Morpho will soon face liquidation.

Therefore, he calls on all major players in Ethena to show some restraint for the sake of long-term development.

With the lessons from Luna, the possibility of algorithmic stablecoins decoupling and the potential risks of re-collateralization have also raised concerns among some observers. To some community members, everything really looks a lot like Luna. Many worry that the next DeFi black swan event could occur in a primitive stablecoin protocol that mishandles risk management, but we also hope this prediction is wrong, as no one wants to experience another Luna.