alETH is a synthetic asset overcollateralized with ETH. It represents a debt position on the Alchemix protocol.
alETH is a low-cap, fully collateralized asset. This asset is exposed to the underlying risks of Alchemix, a protocol rated as Moderately Risky. The Alchemix Elixir is inspired by FRAX's AMO design by supplying liquidity to its primary Curve pools for alUSD and alETH. The Elixir is continuously funded by debt repayments which will further deepen liquidity and help maintain the peg. The asset has an uncapped supply but has inflation control or burn mechanisms in place.
alETH is highly correlated to the overall market. The Alchemix Elixir is inspired by FRAX's AMO design by supplying liquidity to its primary Curve pools for alUSD and alETH. The Elixir is continuously funded by debt repayments which will further deepen liquidity and help maintain the peg.
alETH is a synthetic asset created on the Alchemix platform. It is minted against the value of ETH deposits which acts as collateral backing the value of alETH. alETH is currently backed by a 400% collateralizatoin ratio, meaning for every 4 ETH deposited, the user can borrow 1 alETH.
alETH can be a great way for user to leverage up on their ETH exposure as well as hedge against market volatility without actually selling their underlying ETH. By depositing into Alchemix, the user an borrow up to 25% of their ETH value in alETH. This can then be sold for stablecoins as way to profit on the ETH position without actually losing exposure to their ETH. If alETH were to depeg, then users would be incentivized to buy alETH on the open market at a discount to repay their debt.
alETH can be redeemed back for its underlying ETH at any time. The Alchemix vault is constantly paying off its own debt as it uses the ETH deposits to earn yield across DeFi. It then uses these earnings to pay off its alETH debt over time. When ready, the user just needs to burn alETH on Alchemix to redeem their ETH deposits.