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Ethena Founder Clarifies No Special ADL Agreement in Project Framework

Guy Young reiterates that automatic deleveraging risks have been transparent since Ethena’s launch, citing its low ADL priority due to daily profit settlements and a zero-leverage approach.

ENA

Summary

On Feb. 1, Ethena founder Guy Young denied claims of undisclosed automatic deleveraging (ADL) arrangements, affirming that no special agreements with exchanges exist. He noted that ADL risks have been documented since launch, with Ethena’s strategy of daily profit settlement and zero leverage placing it lowest in ADL priority. Young emphasized partner exchanges have avoided ADL events since 2018, underscoring the robust risk management and operational stability of these platforms even in volatile markets.

Terms & Concepts
  • Automatic Deleveraging (ADL): A risk management mechanism on leveraged trading platforms that reduces positions of profitable traders when liquidations cannot be fully absorbed.
  • ADL Event: An occurrence where a platform uses automatic deleveraging to reduce trader positions to maintain market stability during extreme volatility.
  • Zero-Leverage Strategy: A trading approach that avoids borrowing to increase position size, thereby minimizing exposure to leverage-related risks such as ADL.