Ethena's Lending Allocations Exceed Half of USDe Backing

Ethena's USDe Lending Allocation

Ethena's USDe, a synthetic dollar targeting $1, has 51.2% of its backing allocated to lending, according to a risk assessor's October 12 assessment. The allocation figure does not measure actual borrower drawdowns or cash available for immediate withdrawal.

Lending Categories and Allocation

DeFi lending accounts for 36.9% of the backing, with institutional lending making up 14.3%. Liquid stablecoins, crypto basis, and real-world assets each make up a smaller percentage of the backing.

Safeguards and Risk Mitigation

Ethena's lending policy includes conservative loan-to-value parameters, exposure limits, and review by the Risk Committee to limit losses. Aave and Morpho's withdrawal mechanics also play a role in determining the availability of underlying assets.

Conclusion

Ethena's lending allocations pose a significant risk to the stability of its USDe peg, and investors should be cautious of the potential for losses.