Key Takeaways:
- Ethena’s ENA token surged 550% in simply 5 months.
- USDe’s complete provide grew by 1.5x, reaching $5.8 billion.
- Sustaining excessive APY charges stays a key problem for Ethena.
Since September 2024, the worth of Ethena (ENA) has risen by 550%. What does this protocol supply to the market, and does it have potential?
Though Ethena is a younger undertaking, it has already entered the highest 10 decentralized finance (DeFi) platforms by Complete Worth Locked (TVL). In accordance with DeFiLlama, Ethena ranks tenth with a TVL of $5.8 billion.
Notably, the protocol is shut behind Uniswap (UNI), the second-largest DeFi platform, with $5.9 billion.
Ethena operates on Ethereum (ETH) and focuses on a single product: USDe, an artificial greenback asset.
Not like fiat-backed stablecoins like Tether’s USDT, USDe doesn’t depend on bodily reserves to take care of its 1:1 peg to the greenback. As a substitute, Ethena makes use of delta hedging, which employs perpetual futures to stabilize USDe’s value. In concept, this method gives a extra dependable hyperlink to the greenback. By constantly adjusting publicity to Ethereum or Bitcoin (BTC), this method ensures a steady peg whereas staying true to crypto’s decentralized ethos.
Regardless of being a newcomer to the stablecoin market, USDe has reached 4th place by market capitalization, with $5.7 billion, in line with CoinGecko.
It’s unlikely that USDe will surpass giants like USDT ($139 billion market cap) or USDC ($52 billion market cap). Nonetheless, Ethena might carve out a distinct segment within the DeFi area.
Ethena’s Value Rises by 550% in 5 Months
Ethena launched its token below the ticker ENA in 2024. In the course of the preliminary weeks of buying and selling, the token’s value reached $1.52 on April 11, marking its all-time excessive (ATH). Nonetheless, a sequence of value drops adopted.
On Sept. 6, ENA hit a low of $0.1951 earlier than starting a restoration. By Jan. 6, 2025, the token almost matched its ATH, rising to $1.25.
Because of this, ENA’s value elevated by roughly 540%.
Income figures have been additionally revealed. Token Terminal experiences that Ethena ranks among the many high 10 protocols by charges because the starting of the 12 months. The protocol secured eleventh place with $32 million, surpassing Aerodrome (AERO), a preferred asset amongst sensible cash and a undertaking on the Base platform.
Why Is Ethena Rising?
The stablecoin market is extremely aggressive. Tether alone dominates the area with a considerable market cap, making it unlikely for any undertaking to overhaul it quickly. Nonetheless, one benefit of Ethena is that it operates as an ecosystem, not only a single product like USDe.
USDe holders can earn 13% APY by way of staking instantly by way of the protocol (as of Jan. 24, 2025). This charge is taken into account excessive by trade requirements.
Ethena can be creating a decentralized alternate (DEX) referred to as Ethereal. USDe is predicted to turn into one of many foremost belongings on this platform, which is able to seemingly enhance liquidity.
Ethereum contributes to Ethena’s success as effectively. It’s a confirmed blockchain and a pacesetter within the DeFi area. Furthermore, Ethereum stays the dominant blockchain for stablecoins.
In accordance with CoinGecko, almost 50% of stablecoins have been on Ethereum as of September 2024, with Tron coming in second at 34.5%.
CryptoQuant information exhibits that the variety of stablecoins on ERC-20 (Ethereum’s customary) started growing sharply in October 2024. On Oct. 31, the overall provide was 83.9 billion, rising to 111.3 billion by Dec. 25.
This progress correlates with the rising complete provide of USDe. In accordance with Dune, USDe’s provide elevated from 3.4 billion on Oct. 30 to five.8 billion in January 2025, almost a 1.5x enhance.
What Are the Dangers of Ethena?
Whereas the shortage of greenback reserves is a bonus for Ethena, guaranteeing the decentralization of USDe, the speed peg nonetheless depends on third events. In Ethena’s case, these third events are centralized exchanges (CEXs) the place delta hedging happens.
In accordance with official information, Ethena primarily makes use of Binance and Bybit to open positions. Bitcoin accounts for 57% of the collateral, adopted by Ethereum at 29%.
The chance lies within the potential for these exchanges to be compromised or endure reputational harm, which might jeopardize USDe’s peg to the greenback.
Moreover, a part of the collateral is locked in Ethereum Liquid Staking Tokens (LSTs). Though this at present accounts for just one%, the determine might develop as Ethena features reputation.
Researchers from Pink Brains have additionally raised issues about earnings distribution between USDe and ENA holders. Whereas Ethena’s main focus stays on USDe, the long-term sustainability of the present APY charges is unsure. Excessive APY percentages are sometimes lowered after the early levels of such tasks.
Nonetheless, the problem could be how you can
• Steadiness yield distribution between sUSDe and ENA holders.
• Guarantee sUSDe stays engaging with aggressive yields (~9-12% APY).
It’ll be fascinating to see how Ethena decides to tug this off, as the ultimate method could have a giant…— Pink Brains (@PinkBrains_io) November 19, 2024
Ethena continues to be a brand new undertaking, and it has proven promising outcomes inside its first 12 months. Being a part of the Ethereum ecosystem offers it a robust basis to carve out a distinct segment within the algorithmic stablecoin area.
It’s price noting that DeFi is experiencing speedy growth, also known as a “DeFi Renaissance.” Stablecoins play an important function on this progress by offering liquidity and bridging decentralized functions with the centralized world.
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