NOIDA (CoinChapter.com)— Speculation asking – “Is Ethena a Scam crypto coin?” are now gaining traction after YearnFi and Fantom founder Andre Cronje raised some objections about the project. The Ethena coin (ENA) drew attention from investors, analysts, and traders after its launch. ENA is the native token of the Ethena Labs blockchain project.
Since the token’s launch in April, Ethena has achieved several milestones, which have helped the token attract attention. BitMEX founder Arthur Hayes also came out in support of the project, forecasting a $10 price target for the token.
However, Ethena’s USDe stablecoin, on which the project offers over 27% yields, raised some eyebrows, reminding traders of the Terra Luna days. The ENA crypto developers claimed that USDe operated on a fundamentally different model than UST.
The Core of Cronje’s Skepticism
According to Ethena Labs’ documentation, Ethena promises high yields through a combination of collateralization with staked Ethereum, delta hedging, and yield generation. Ethena Labs backs its stablecoin offering via staked Ethereum, providing a measure of stability.
However, Andre Cronje’s assessment of Ethena centered on an examination of USDe’s operational model. Maintaining price stability, or peg, is a known challenge in the stablecoin sector.
Cronje focused on discerning whether Ethena’s technological underpinnings and its promise of stability hold substantial merit or if they mask underlying vulnerabilities. The Fantom founder emphasized the necessity of transparency in Ethena’s operations.
Moreover, Cronje advocated a community-driven vetting process, stressing that thorough analysis and public discourse were crucial in validating Ethena’s claims and ensuring its safety within the DeFi ecosystem.
The YearnFi founder claimed that the USDe model was fraught with potential risks. Cronje explained how using staked Ethereum (stETH) as collateral for a short position on stETH could, in theory, create a risk-neutral position.
However, Cronje argued that negative funding rates and market downturns could erode the collateral, leading to liquidation. The DeFi expert compared Ethena’s USDe model to overly simplistic trading strategies that fail to account for market complexities.
Ethena a Scam? Crypto Community Reacts
Cronje’s arguments provoked a surge of reaction from crypto market participants, who labeled Ethena a scam cryptocurrency coin.
Moreover, the YearnFi founder appealed to the DeFi community to take an active role in interrogating the platform’s claims, engaging with its developers, and conducting independent analyses to uncover any potential discrepancies or red flags.
Following Cronje’s analysis, crypto trader CoinMamba revealed that he plans to dump the ENA token post-farming due to the project’s risks. Speculation about whether or not Ethena is a scam also rose.
In reply to another user, CoinMamba said that if the USDe model is proven right, the project might have potential.
Arthur Hayes, who has been an Ethena promoter since the project’s launch and has invested in it, stated that Guy Young, Ethena Labs founder, will do a Twitter space on April 5 to answer all of Cronje’s doubts on USDe. Perhaps the space will alleviate some of the concerns of observers and investors?
