💵Weekly Recap: Critics Warn Of USDe Risks As Adoption Surges

Happy weekend Defiers!

Ethena’s yield-bearing USDe stablecoin continues to garner controversy as its adoption surges.

Prominent voices within the web3 community warning that the token’s increasing integration within leading DeFi protocols could pose significant risks to the sector. Andre Cronje, the serial DeFi founder, is among those warning that USDe’s reliance on high funding rates on short positions for its yield could backfire in the event of a bearish downturn.

The criticism placed a spotlight on MakerDAO, with several protocols seeking to downsize exposure to Maker in response to the project onboarding USDe as collateral with an initial debt ceiling of $100 million, and some in its community calling for a limit of up to $1 billion. Notably, Aave reduced the loan-to-value ratio for DAI pools following a proposal to eliminate support for the stablecoin as collateral entirely.

Regardless, Ethena continues to push ahead despite the controversy, with the project onboarding Bitcoin as collateral and airdropping its ENA token to early adopters. ENA debuted at a $1 billion market cap and has since rallied to more than $1.5 billion.

Crypto markets pulled back this week, with leading coins posting heavy losses as the U.S. Dollar Index outperformed expectations. The retracement comes as Bitcoin’s fourth halving is roughly two weeks away, however, price action is diverging significantly from past trends surrounding the event.

Liquid restaking was among the few web3 categories to post a weekly gain, with the sector riding fresh all-time highs for TVL above $8.5 billion. Pendle, the leading yield tokenization protocol, also enjoyed heady gains as its TVL pushed above $4 billion for the first time.

Memecoins continue to capture the imaginations of analysts and traders, despite nine of the sector’s top ten tokens by market cap pulling back over the past week. Surging memecoin activity drove a record high for volume on decentralized exchanges, with new projects seeking to harness momentum from degen speculators.

The SEC started accepting public commentary on the cohort of pending spot Ether ETF applicants, but analysts remain bearish on the funds’ chances of receiving regulatory approval any time soon. In other ETF news, BlackRock onboarded five new Authorized Participants for its spot Bitcoin fund, including TradFi heavyweights Goldman Sachs, Citadel Securities, and Citigroup. Bitwise’s CIO also predicted that up to $1 trillion will flow into spot Bitcoin ETFs in the coming years.

Elsewhere on the regulatory front, a U.S. court found Terraform Labs and its founder, Do Kwon, liable for investor losses totaling $40 billion. The Tron Foundation is also seeking the dismissal of the SEC’s lawsuit against Tron, arguing that the regulator is illegitimately attempting to apply U.S. law to offshore transactions.

Plus, the Ethereum community debates whether to reduce Ether issuance, Frax activated its fee switch for FXS stakers, Zircuit’s pre-mainnet TVL soars above $1 billion, and Wormhole airdropped its W token at a more than $2 billion capitalization.

Enjoy!

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Friday

• Do Kwon And Terraform Labs Found Liable For $40 Billion Fraud The United States Southern District of New York jury found Terraform Labs and its co-founder Do Kwon misled investors, acted recklessly, and are liable for civil fraud.
• MakerDAO Founder Says Having “Rando’s” Participate in Governance Makes DAOs Unpredictable Rune Christensen levied criticism at decentralized governance during a Twitter spaces event hosted by Ethena Labs.
• Aave Reduces MakerDAO's DAI Collateral After Proposal to Completely Eliminate It Aave is decreasing DAI loan-to-value (LTV) ratio by 12 percentage points in response to concerns over MakerDAO adding Ethena's USDe synthetic dollar as collateral.
• “Bots Spam Better Than Humans” Leading To Transaction Failures On Solana On April 4, more than 75% of transactions on Solana were unsuccessful, posting a second consecutive daily all-time high.
• BlackRock Adds Five New Firms To ETF, Including Goldman Sachs, Citigroup The firms can now create and offer shares in IBIT, BlackRock’s spot Bitcoin ETF, to investors.
• BONSAI Memecoin Aims to Become De Facto Currency On Lens MadFi, the team behind the Bonsai token –which MadFi says is Lens Protocol’s first memecoin – raised $1 million in an angel round.
• Frax Stakers On Track To Earn $20.8M Annually After Fee Switch Activation Frax stakers are set to share around $400,000 worth of fee revenue after Frax became one of a few web3 projects to activate a highly sought-after yet elusive “fee switch.”

Thursday

• Crypto Heavyweights Torn Over Ethena’s New Stablecoin Prominent crypto luminaries are weighing in on the potential risks posed to holders of Ethena’s booming yield-bearing stablecoin, USDe.
• Ethena Adds Bitcoin As Collateral Asset For USDe The move is intended to help the delta-hedged synthetic dollar scale by accessing the Bitcoin futures market.
• Crypto Markets Bounce As Hedge Funds Pile On Bitcoin Shorts Hedge funds are betting big against Bitcoin in the futures markets, possibly looking to profit from elevated funding rates.
• “Stablecoin Wars” Heat Up As PayPal Enables PYUSD For Cross-Border Transfers PayPal’s cross-border money transfer service Xoom will allow customers to convert USD into PYUSD and transfer the token to 160 different countries.
• AI-Powered Web3Firewall Raises $2.5 Million Round Led By Nomura's Laser Digital Web3Firewall aims to use machine learning and AI to quickly detect malicious transactions.
• Vana Launches DAO Allowing Users To Control and Sell Their Reddit Data The Reddit Data DAO will offer tokenized incentives to users contributing data, creating AI models, and providing computation to the project.
• Zircuit Attracts More Than $1B In Pre-Mainnet Deposits Over Six Weeks Farmers are piling ETH and Ether staking derivatives into Zircuit’s pre-mainnet points campaign.

Wednesday

• Chile Stands to Lead Latin America For Crypto Regulation, Even as it Lags in Adoption Chile is gearing up for its FinTech law recognizing “crypto assets” as a distinct legal category to take effect.
• SEC Asks For Public Comments On Ethereum ETFs But Experts Say It’s Not Bullish Critics say the comments period is just standard procedure, and that spot Ether ETFs will not be approved any time soon.
• Pendle TVL Approaches $4 Billion On Airdrop Farming Demand The yield trading protocol processed $530 million of trades on April 2 after launching new Ethena pools.
• Wormhole's W Token Climbs to $2.5 Billion Market Cap Post Airdrop W began trading at a massive $2.9 billion market cap, but has since pulled back.
• Ether Issuance Emerges As Hotly Contested Issue Ethereum Foundation researchers argue ETH emissions should be reduced, but critics fear harming the neutrality of Ether’s monetary policy.

Tuesday

• DeFi Projects Clash After MakerDAO Adds Ethena’s USDe As Collateral Nostra Finance is pausing new borrowing and lending of DAI, while a similar proposal has been floated in Aave’s governance forum.
• Crypto Markets Turn Sharply Lower As Dollar Strengthens BTC tumbled 9% in two days as the U.S. Dollar Index posted a surprise rally.
• Ethena Labs ENA Launches at $1 Billion Market Cap Post Airdrop As “Sats Campaign” Kicks Off Ethena Labs airdropped 750 million ENA tokens, amassing a $1 billion market cap in the process. Its USDe synthetic dollar also has a market cap of over $1.6 billion.
• Vitalik Buterin and Arthur Hayes Weigh In On Memecoin Frenzy Hayes said memecoins are driving growth for leading blockchains while Vitalik believes meme tokens could drive public goods funding.
• Tron Says SEC Lawsuit Should Be Tossed For Extraterritorial Overreach The Tron Foundation said the SEC is seeking to apply U.S. regulations to offshore transactions in a lawsuit that should be dismissed.

Monday

• Memecoins Fuel Record Monthly DEX Trading Volumes Decentralized exchange users traded more than $261 billion of tokens in March amid the memecoin bubble.
• Bitwise CIO Predicts $1 Trillion Entering Crypto Markets Bitwise’s Matt Hougan said the $12 billion asset managers have already injected into spot Bitcoin ETFs is “barely a down payment.”
• LRTs Surge To Record Dominance Over Restaking Sector Liquid restaking protocols surged to a record combined TVL of more than $8.5 billion worth of Ether.
• The Bitcoin Halving Is 19 Days Away — How Did BTC Perform In Past Cycles? The current market cycle is already bucking historic trends, with BTC previously tagging new all-time highs seven months after halving events.

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