Reserve Decay Simulation

Overview

This simulation uses a dynamic model to estimate the number of days until Ethena’s reserve fund depletes, the simulations depend on various levels of negative funding rates, which are annualized based on shorter-term (8-hour) funding fees. In addition, the indicator updates every hour to reflect real-time changes in the fund's asset value and projected funding costs. The x-axis of the visualization represents the time in days until depletion, allowing users to see how the fund's longevity changes with different rate scenarios.

How can I use it?

This indicator helps in providing a clear picture of how vulnerable the Ethena protocol is to extended periods of positive funding rates. Furthermore, this helps users to prepare or adjust strategies accordingly in order to mitigate risks. By considering various negative funding rate scenarios, stakeholders can evaluate the potential impacts of different market conditions or economic downturns on the reserve fund sustainability.

One of the significant risks associated with Ethena's protocol is the possibility that funding rates turn positive and remain so for an extended period. Such a shift would move their position away from a delta-neutral strategy, potentially resulting in losses if the positive funding rates persist. This indicator examines such scenarios in relation to the protocol's Reserve Fund and assesses various timeframes and levels of funding rates. It provides users with insights into how well the protocol is capitalized to handle different levels of financial distress.