Ethena Pay’s 11x leverage loop promises high yield, but risks hidden losses
Borrowing costs and funded exits determine the money left for users, while the vault’s actual leverage and controls remain unverified. Read the full story on CryptoSlateUnderstand the crypto stories that matter and what to watch next. Get The Catalyst in your inbox
Ethena Pay’s new Earn+ vault design pairs USDe collateral with USDT borrowing, creating a potential gap between the value a lending protocol reports and the money a user could recover.
The app’s Oct. 28 launch disclosure describes a strategy targeting roughly 11 times leverage whose USDe oracle follows USDT.
If USDe falls against USDT, the two measures can diverge. A price reference that follows the debt token can miss the collateral’s discount, leaving reported collateral health insensitive to a market move that reduces the value remaining after debt repayment.
Earn+ is an external vault service run by Upshift and Steakhouse through Aave v4 on Avalanche. Ethena Pay supplies the interface and advertises up to 12% APY.
An oracle supplies the prices a lending protocol uses to value collateral and debt. Aave’s health factor compares collateral value, adjusted for its liquidation parameter, with borrowing. That calculation determines proximity to liquidation.
In its Oct. 20 technical assessment, Aave Labs explicitly said the Avalanche USDe price reference follows USDT and would miss a USDe-specific downside depeg. The assessment describes a Chainlink USDT/USD feed and an adapter with a $1.04 upper price cap.
If both sides of a position follow the same USDT reference, a USDe-only market discount can leave oracle-valued collateral health unchanged in response to that discount. Debt growth, changes in balances, and risk parameters can still move that ratio.
LlamaRisk’s onboarding recommendation, amended Oct. 19, proposed a 93% USDe collateral factor and capped USDT pricing for an Ethena Ecosystem Spoke.
The recommendation's exact vault account, current collateral and debt, and live oracle wiring remain unverified, so the disclosed leverage target cannot be treated as an observed position.
Consider an explicitly hypothetical position, defining leverage as gross assets divided by equity. At 11 times leverage, $100 of initial equity supports 1,100 USDe worth $1,100 and 1,000 USDT of debt worth $1,000, with both tokens initially at $1.
Hold USDT at $1 and the debt balance unchanged. Ignore interest, rewards, fees, trading costs, and rebalancing. The value left after debt repayment is then 1,100 multiplied by USDe’s market price, minus $1,000.
| Hypothetical USDe price | USDe asset value | Equity after debt | Loss of initial equity |
|---|---|---|---|
| $0.99 | $1,089 | $89 | 11% |
| $0.98 | $1,078 | $78 | 22% |
| $0.95 | $1,045 | $45 | 55% |
The table shows economic marks under the stated assumptions and supplies no observed Earn+ losses or liquidation thresholds. A realized loss would depend on the price and costs of an exit.
A manager that reduced exposure earlier, or a vault operating below the target, would produce different results. A position can remain above its protocol liquidation trigger while its economic equity falls.
Ethena's FAQ caps allocations at $4.5 million overall, with individual limits of $20,000 for Standard users, $50,000 for Pro and $200,000 for VIP.