Recent volatility in the price of Bitcoin (BTC) and its struggle to consolidate above the $70,000 mark have 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 Athens Laboratories (ENA) could significantly extend and propel the Bitcoin bull market to new heights.
In a recent publish on the social media site
Bitcoin Bull Market Boost
To provide more context as to why Edwards is suggesting this possibility, on April 4, Ethena Labs announced their intention to engage in a cash-and-carry trade involving Bitcoin.
According to the protocol announcement, Ethena Labs can manage risks and provide more stable support for its product by buying and selling Bitcoin.
One of the key factors Edwards highlights is Ethena’s ability to curb Bitcoin’s excessive leverage. derivatives markets. In doing so, Ethena aims to avoid excessive risk-taking and potential market instability.
Furthermore, Ethena’s withdrawal of spot supply from the market could reduce selling pressure, thus supporting the price of Bitcoin and prolonging the bull market.
The protocol also noted that Bitcoin derivatives markets offer superior scalability and liquidity compared to Ethereum (ETH). This feature supposedly makes Bitcoin a suitable asset for delta coveragea risk management strategy employed by Athena.
With $25 billion in Bitcoin open interest available to Ethena for delta hedging, the scaling capacity of its synthetic dollar product, USDe, has increased significantly. Athena Labs noted in its announcement the following:
In just 1 year, BTC open interest on major exchanges (excluding CME) grew from $10 billion to $25 billion, while ETH OI grew from $5 to $10 billion. BTC derivatives 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 the Bitcoin bull market, a user raised concerns about possible disadvantages. Edwards recognizes that execution risks, such as custody failure or delta neutrality failure, may 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 that market forces will ultimately dictate Ethena’s net annual percentage yield (APY).
In short, by limiting excessive leverage in futures markets and reducing spot supply, Ethena could significantly support the price of BTC and prolong the current bull run.
Currently, the price of BTC has seen a significant decline, dropping to the $68,800 level. This marks a 4.3% drop compared to Monday’s price.
In parallel, Athena’s native token, AND ON, also followed the general market downtrend, reflecting the price movement of BTC with a 4% drop. ENA is currently trading at $1.22.
Featured image from Shutterstock, chart from TradingView.com
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