Ethena’s (ENA) Crucial Role In Bitcoin Bull Market: Expert Identifies Critical Factors For Sustainable Growth
2024年4月10日 - 9:00AM
NEWSBTC
The recent volatility in the Bitcoin (BTC) price and its struggle
to consolidate above the $70,000 mark has raised questions about
the sustainability of its ongoing bull run. However, market expert
Charles Edwards, co-founder of Capriole Invest, believes that the
decentralized finance (DeFi) protocol Ethena Labs (ENA) could
significantly extend and boost Bitcoin’s bull market to new
heights. In a recent post on social media site X (formerly
Twitter), Edwards suggested that Ethena’s actions, such as
constraining over-leverage in derivatives markets and reducing spot
supply, can propel Bitcoin’s price higher for a longer period.
Bitcoin Bull Market Boost To provide further context as to why
Edwards is suggesting this possibility, on April 4th, Ethena Labs
announced its intention to engage in a cash-and-carry trade
involving Bitcoin. According to the protocol’s announcement,
Ethena Labs can manage risk and provide a more stable backing for
its product by buying and shorting Bitcoin. Related Reading:
Solana Open Interest Drops $370 Million Amid Network Troubles, $200
Still Possible? One of the key factors Edwards highlights is
Ethena’s ability to constrain over-leverage in Bitcoin derivatives
markets. By doing so, Ethena aims to prevent excessive risk-taking
and potential market instability. Additionally, Ethena’s
taking spot supply off the market can reduce selling pressure, thus
supporting Bitcoin’s price and prolonging the bull market. The
protocol also noted that Bitcoin derivative markets offer superior
scalability and liquidity compared to Ethereum (ETH). This
characteristic reportedly makes Bitcoin a suitable asset for delta
hedging, a risk management strategy employed by Ethena. With
$25 billion of Bitcoin open interest available for Ethena to delta
hedge, the capacity for its synthetic dollar product, USDe, to
scale has increased significantly. Ethena Labs noted in their
announcement the following: In just 1 year, BTC open interest on
major exchanges (exc. CME) has grown from $10bn to $25bn, while ETH
OI has grown from $5 to $10bn BTC derivative markets are growing at
a faster pace than ETH and offer better scalability and liquidity
for delta hedging Weighing The Risks While Edwards’ statement is
optimistic about Ethena’s impact on Bitcoin’s bull market, one user
raised concerns about potential downsides. Edwards acknowledges
that execution risks, such as custody failure or delta neutrality
failure, could have adverse effects. Edwards identifies
custody risk as the most significant risk in this context. However,
he highlights that any negative impacts will likely be short-lived,
and market forces will ultimately dictate Ethena’s net annual
percentage yield (APY). Related Reading: Bitcoin To $150,000 Is
“Programmed” With Halving Approaching: Analyst In short, by
limiting over-leveraging in future markets and reducing spot
supply, Ethena could significantly support the price of BTC and
extend the current bull run. Currently, BTC’s price has experienced
a significant decline, plummeting to the $68,800 level. This marks
a 4.3% decrease compared to Monday’s price. In parallel, Ethena’s
native token, ENA, has also followed the overall downtrend of the
market, reflecting BTC’s price movement with a 4% decrease.
Presently, ENA is trading at $1.22. Featured image from
Shutterstock, chart from TradingView.com
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