On Thursday, the 26th, Ethena Labs, developer of the decentralized stablecoin protocol Ethena, revealed that it has released a new stablecoin product, UStb which will be fully backed by BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL). The UStb would function similarly to the conventional stablecoin.
Taking to X (formerly Twitter) to announce this new development, Ethena Labs expressed that UStb’s value is tied to a very secure and established financial asset as it is being backed by asset management firm BlackRock and Securitize’s BUIDL tokenized fund.
The post read, “We are excited to announce Ethena’s newest product offering: UStb”
“UStb will be fully backed by @Blackrock BUIDL in partnership with @Securitize, enabling a separate fiat stablecoin product alongside USDe…..”
According to Ethena Labs, the UStb’s function is completely detached from that of the USDe. It’d still function as the traditional stablecoin but would be expanded to other centralized exchanges, offering users and partners a different choice of collateral.
In their words, ‘This will exist as an isolated product separate from USDe offering users and exchange partners a new product with a differentiated risk profile to USDe,”
Stablecoins are cryptocurrencies designed to maintain a stable value, typically tied to the US dollar or other fiat currencies. USDe, an algorithmic stablecoin, was widely affected by negative funding rates which was one of the major concerns on USDe. Its stability in markets where funding rates are negative was questionable. And this gave rise to the launch of UStb.
Now, for the USDe to sustain its price peg to the US dollar, a delta-neutral strategy that involves Ethena Labs purchasing Bitcoin/Ethereum in the spot market while opening an equivalent short position on the derivatives market is employed. The procedure gives room for Ethena to gain yields from positive funding rates and ETH staking returns.
However, in spite of the stability of the USDe over the past six months against negative market conditions, concerns still remain, hence Ethena Labs’ decision to possibly close down its hedging positions for USDe. If this is done, it will protect against losses, converting all of USDe’s reserve assets to UStb, limiting possible risks that negative funding environments would attract.
What You Should Know
Funding rates are periodic payments between perpetual traders to maintain a contract’s price with its spot counterpart.
A negative funding rate occurs when a contract’s price falls below the spot price, indicating that short position holders have to pay long position holders.
Discover more from DiutoCoinNews
Subscribe to get the latest posts sent to your email.
