Ethena Labs, the developer of synthetic USDe dollar, is developing a new Blackrock-backed stablecoin UStb. The firm stated it would invest the reserves of its new stablecoin into Blackrock’s USD Institutional Digital Liquidity Fund (BUIDL).
Stablecoin UStb is Ethena’s second offering this year following the launch of the synthetic USDe dollar, which maintains a one-dollar peg and derives value from a cash-and-carry trade, a form of arbitrage approach between an asset and its derivative. Ethena Labs’ new stablecoin announcement, designed to offer users and exchange partners more options, injected a 14% boost to the firm’s ENA governance token overnight, from $0.307 to $0.378.
Response to Negative Market Situations
According to an official company blog post, stablecoin UStb will function like a traditional stablecoin and remain independent from USDe. Collateralizing the new stablecoin using USDe and Blackrock’s BUIDL will avail trust and stability to the latest product, potentially attracting new users looking for an alternative stablecoin. The firm noted that the motivation behind the Blackrock-backed stablecoin UStb was the community’s concerns regarding USDe’s response to negative funding rate situations. Praying that UStb could resolve this major issue, Ethena Labs wrote:
“Despite bearish conditions over the last six months, Ethena’s USDe has not endured a single week of negative funding […] Nevertheless, if required USDe backing composition can dynamically adjust between basis positions […] USDe can benefit from incorporating UStb during periods of weak funding.”
Interaction between USDe and UStb
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The management of Ethena Labs’ new stablecoin UStb will complement USDe during turbulent market situations by strategically closing and reallocating a protective position to support USDe from UStb as the need arises, thereby helping stabilize USDe. Moreover, the firms also intends to use UStb as margin collateral on centralized exchanges Bitget and Bybit giving investors a unique collateral option. As the developer spreads its wings further into the stablecoin market, Ethena plans to increase its centralized exchange offerings beyond Bitget and Bybit, which details and timelines it plans to announce in due course.
The introduction of the Blackrock based stablecoin UStb creates additional alternatives for users and cryptocurrency exchanges thereby creating broader chances for the adoption of Ethena’s stablecoin offerings. The firm promised to give further details soon, outlining its plans to integrate stablecoin UStb into more platforms and improve its utility and accessibility within the dynamic digital asset ecosystem.
Ethena Labs plans to play a more significant role in the decentralized finance (DeFi) space to cement its place further within the cryptocurrency space. The stablecoin developer plans to transform Ethereum’s mechanics and make it a yield-bearing stablecoin operating away from regular banking. Ethena would leverage on-chain custody, delta-neutral strategies, and derivatives to enhance stability and scalability and manage volatility. The company is currently riding on a positive financial wave, having raised some $14 million last February in a strategic fundraising led by Dragonfly, Arthur Hayes, and Maelstrom. The cash boost enables Ethena Labs to have a total valuation of $300 million, further revealing its potential to walk among the giants.
Responsive and Resilient Market Player
Since it was launched, Ethena Labs’ USDe has carved its niche and emerged as a growing stablecoin with a market value above $2 billion by April 2024, according to data by CoinGecko. The firm announced it suffered a frontend attack in early September, but the team reiterated it didn’t suffer any financial loss, with only minimal damage reported on its user interface. By adding the Blackrock-backed stablecoin UStb, Ethena seeks to solidify its position as a resilient and responsive market player that remains stable in any market condition.
The strategic combination of the liquid stability stablecoin UStb and the synthetic USDe gives Ethena the unique ability to face market challenges and ensure users have the much-desired alternatives. Ethena’s new stablecoin is a huge step forward in tackling challenges associated with stablecoin volatility. The different offerings addressing risk management issues enhance Ethena’s position by offering robust and secure financial products.
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