What’s Cooking with Aave and Ethena’s USDe?

So, buckle up, crypto friends! LlamaRisk has decided to shake things up by suggesting that borrowing rates for Ethena’s USDe are about to go on a rollercoaster ride. We’re talking a potential hike across five Aave V3 markets that could turn borrowing into a gamble rather than a golden ticket.

A Little Background on the Proposal

The latest buzz from Sept. 9 hints at raising USDe’s base variable borrow rate from a comfy 5% to a not-so-cozy 6%. This might be happening on Core, Plasma, Monad, Mantle, and Avalanche—that’s five locations where the money might get tight!

Money Talk: What’s the Impact?

Here’s the juicy part: you can expect those modeled borrower APRs (that’s Annual Percentage Rates for the fancy folks) to heighten by a thrilling 13 to 89 basis points. This is based on some cheeky borrowing going on with a whopping $323.8 million in USDe debt versus $1.18 billion that’s been loaned out. Talk about some juicy math!

How Is This Gonna Work?

Now, don’t get too excited just yet; LlamaRisk is keeping things under wraps by framing these changes as mere recommendations. They’re hoping to roll this out through the Risk Steward process—sounds official, right?

A Mixed Bag of Borrowing Rates

This hike isn’t uniform—nope! It’s a two-part dance where one side raises borrowing costs while the other lowers it just a smidge. Avalanche—our superstar market—will see the biggest offset with just a 13-basis-point bump, while Mantle, being the chillest of the bunch, takes nearly the full hit. Yikes!

What’s the Point?

The plan is mainly targeting those daring folks who dive into leveraged sUSDe positions. According to some clever folks over at TokenLogic, these borrowers have been recycling USDe into sUSDe like they’re trying to turn lead into gold. This plan dreams of a higher borrowing floor to reduce those loops and, fingers crossed, raise yields for the sUSDe holders to a humble 5.3%—but that’s only if the loop-funded supply decides to unwind!

Interest Rates & Market Dynamics

Fast forward to Sept. 10, and Aavescan’s sUSDe snapshot claimed a busy 4.72% supply APY. On the flip side, the Core, Plasma, and Monad market pages were already showing USDe borrow APRs above that level—uh-oh! This left borrowers in a sticky situation of basically earning negative carry once you slice through incentives, transaction costs, and those pesky frictions.

A Moving Target

Rates are as dynamic as a cat with a laser pointer, changing as utilization shifts. So, keep in mind that the proposed market-level APRs reflect what was true on Sept. 9 and might not hold for long.

In Conclusion

Oh, and by the way, Ethena’s USDe is currently on a wild ride, registering a slight dip of -0.01% in the past 24 hours, and it’s hanging out at a cool #18 in market cap rank. Keep your eyes peeled, folks, because this rollercoaster isn’t slowing down anytime soon!