đź’µWeekly 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.

The Defiant Alpha
“an industry must-read”

Get even more! For actionable insights and community access, Join The Defiant Alpha to receive:

  • The Defiant Daily | Mon to Fri
  • Weekly Recap | Saturdays
  • DeFi Alpha | Sundays
  • Access to exclusive degen chats and events

Become a Member