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According to Ethena Labs, the USDe stablecoin’s exposure to Bybit via derivatives is more than offset by its reserve fund.
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Ethena Labs has assured users that its yield-bearing stablecoin, Ethena USDe (USDe), remains solvent after an exploit drained more than a billion dollars from crypto exchange Bybit on Feb. 21.
According to the decentralized finance (DeFi) protocol, its synthetic dollar token, USDe, has roughly $30 million of exposure to financial derivatives on Bybit. However, the protocol claimed in an X post that its reserve fund is more than enough to offset any losses from the exploit. Bybit was hacked for over $1.4 billion in Lido Staked Ether (sTETH), Mantle Staked Ether (mETH) and other cryptocurrencies.
Hedging against crypto market volatility using offchain derivatives plays a central role in Ethena Labs’ strategy for generating yield on USDe.
“Currently there is <$30m of aggregate unrealised PNL relating to Bybit hedge positions, which is less than half of the reserve fund,” Ethena said, adding that: “USDe remains more than fully collateralised at this time.”
Source: Ethena Labs
Related: Bybit exchange hacked, over $1.4 billion in ETH-related tokens drained
Ethena’s reserve fund “acts as an additional margin of safety behind USDe.” It held approximately $46 million as of the fourth quarter of 2024, according to Ethena’s documentation.
The DeFi developer further assured users that none of USDe’s cryptocurrency backing is held on Bybit itself. Instead, the digital assets are held with an off-exchange custodian, Copper.
“As a reminder: all spot assets backing USDe are held in off exchange custody solutions, including Bybit via Copper Clearloop for this precise reason,” Ethena said.
Centralization risks
Ethena lets users mint USDe against tokens such as Bitcoin (BTC), Ether (ETH), liquid staking tokens and other stablecoins. It then hedges against the portfolio’s inherent volatility using offchain financial derivatives.
Launched in February, USDe bootstrapped billions of dollars from stablecoin holders pursuing double-digit returns from Ethena’s yield strategy.
“Ethena harnesses yield from staked assets (think Lido’s stETH), plus the funding and basis spread from perpetuals and futures markets, passing these gains on to sUSDe holders,” crypto researcher Messari said in a December research note.
However, Ethena’s CeDeFi — centralized DeFi — trading strategy poses risks, including failures by offchain exchanges, custodians and settlement providers, Messari noted.
Following the high-profile Bybit hack, the exchange’s CEO, Ben Zhou, reassured customers that withdrawals are still open but may take several hours to process due to high congestion.
Magazine: 2 auditors miss $27M Penpie flaw, Pythia’s ‘claim rewards’ bug: Crypto-Sec
This article first appeared at Cointelegraph.com News
