Ethena Labs has submitted a board proposal to replace the synthetic dollar protocol’s static 7-day sUSD cool-off period with a dynamic model that adjusts based on the composition of $USDe‘s supporting assets.
The proposed framework would introduce cooling off periods of 1, 3, 5 or 7 days, depending on how $USDe‘s reserves are allocated at any time.
The timing is remarkable. Ethena’s deployed capital has fallen to just $791 million, a decline of more than 85% from its all-time high. The contraction reflects broader risk-off-market conditions, with bulls and bears now virtually equal in the derivatives market, an unusual circumstance that has made basic trading much less profitable.
That collapse in demand for long-term debt makes this cooling proposal viable. The authors note that by early 2025, approximately 93% of $USDeThe support consisted of perpetual futures positions, making the seven-day period a reasonable safeguard. Today, perpetual futures only account for 11% of the coverage, with 89% now held in liquid stablecoins and credit positions that are currently outperforming funding rates.
$USDeThe market’s market capitalization fell sharply after the Oct. 10 crash, losing more than $5 billion as investors rushed to redeem their shares. The episode served as a major stress test, and the protocol’s ability to meet repayments during that period is cited in a Blockworks Advisory analysis on the forum as evidence that the system performs well under pressure.
The proposal also includes safeguards to prevent the shorter cooldown from causing problems during sudden stress events. If daily unstaked requests exceed the 14-day rolling average twice, while coverage for 3 days simultaneously falls below 1.5x, the cooldown will automatically be extended by one day.
In short, now that the protocol is on a much more liquid reserve basis, the argument is that locking users into a week-long wait no longer reflects reality.
The protocol $ENA token was largely unchanged on the news, trading around $0.10, or a market cap of $900 million, according to Coingecko. However, this year it has already fallen by more than 50%.
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