The LUNA of this cycle - In A Good Way
ENA - USDe has an extremely similar setup to LUNA-UST back in the 2021 bull cycle. LUNA crashed due to the inherent instability in its algorithm to back UST with the value of LUNA, which was unsustainable when the market crashed.
USDe solves this by employing a novel "algo" stablecoin backed by delta neutrality with native yields on both the long (stETH yield) and the short (funding rate). While some may argue that the design is not sustainable when the funding rate goes negative, the inherent demand for USDe addresses this problem to a large degree. When the funding rate becomes highly negative and isn't covered by the stETH yield, USDe stakers experience losses, prompting them to redeem their tokens. As Ethana unwinds these positions, the funding rate would decrease as the shorting pressure reduces. Thus, Ethana maintains yield and stability to a large extent at the cost of TVL.
On the other hand, while many may argue that governance tokens are essentially "cash-out" tokens in crypto, Ethana's governance could hold real meaning by onboarding new exchanges, custodians, changing the funding rate strategies, or potentially diversifying the stablecoin protocol's reserves down the line. Especially with a star-studded investor lineup, including investments from all of the top 3 exchanges (Binance, OKX, Bybit), Dragonfly, and Arthur Hayes, I am confident that ENA will perform exceptionally well during this market cycle. Show Less
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