ENA, the native cryptocurrency of Ethereum-based DeFi project Ethena has witnessed a strong surge as the platform pitches a direct stablecoin competition with industry giant Tether. As a result, the ENA price has shot up by 25% moving to $0.35 with its market cap surging past $920 million. Also, the daily trading volume for ENA has surged by 180% to $233 million.
Ethena’s USDe Stablecoin to Compete With Tether’s USDT
In a matter of months, Ethena Finance has scaled its USDe stablecoin to a $3 billion market cap making it the fastest-growing DeFi project in history. Popular crypto trader Eugene Ng Ah Sio stated that taking the competition head-on with Tether, Ethena will begin its transition from a DeFi-native stablecoin to a legitimate stablecoin.
Furthermore, Ethena’s recent launch of UStb stablecoin with BlockRock and Securitize further cements its market position allowing it to position USDe as a leading contender. The analyst explains that the USDe stablecoin performs excellently in both aspects – value proposition and distribution.
Looking at the USDe stablecoin value proposition, it allows users to deposit $1 and receive a delta-neutral position, split between staked ETH and an ETH short position while earning yield. As of now, the sUSDe offers the highest sustainable yields among stablecoins, anywhere between 10-13% APY. This has what helped Ethena’s USDe top emerge as the fastest-growing stablecoin achieving a total-value-locked (TVL) of $3.7 billion within 7 months of launch. The below image shows how USDe beats other DeFi products in terms of yield returns.
Additionally, Ethena has also aced the distribution part, similar to Tether’s USDT, thereby giving the DeFi product a huge moat in the market. Also, the world’s second-largest centralized exchange Bybit has integrated automatic yield-bearing capabilities for USDe stablecoin into the platform. Thus, users can now access a superior form of stablecoin collateral without any friction.
Currently, there are about $38.6 billion in stablecoins on centralized exchanges, which is 15 times the current supply of USDe. If just 20% of this amount chooses to earn 5-10% on USDe instead of holding onto it, this could nearly quadruple USDe’s available market, noted Eugene Ng Ah Sio. BitMEX co-founder Arthur Hayes has also been supporting this growth.
Fucking send it. https://t.co/a1zMVYe1Sm
— Arthur Hayes (@CryptoHayes) October 11, 2024
USDe to Benefit from Fed Rate Cuts
As of the current yield output, Ethena’s USDe offers a 5-8% premium over the Fed fund rates thereby attracting yield-seeking capital. With the Fed rate cut cycle kickstarting last month with 50 bps cuts, this gap will further widen making USDe an even more attractive option for investors.
Over the next 24 months, the Fed is likely to cut interest rates by 2% points bringing them to 3 – 3.5%. One could argue that there are positive indirect effects on funding rates: as markets rise, risk appetite returns, demand for leverage increases, and funding rates go up. When these factors combine, they create a powerful dynamic that drives spreads higher, highlighting the true value proposition of Ethena’s product.
Commenting on the development, the crypto analyst wrote:
“I am confident that a return of the yield premium would result in a re-accelaration of USDe growth. Importantly, this tailwind is both easily understandable and attractive to most market participants”.
Furthermore, the analyst believes that the launch of the UStb stablecoin by Ethena would further supercharge the adoption of USDe. The analyst wrote:
“The market is under-appreciating this because there is now literally zero reason to hold any other stablecoin in crypto aside from USDe after this assuming you are comfortable with exchanges like Binance not blowing up (even if they do, USDe does not go to zero as it is fully collateralized by BTC & stETH).”
Amid all these developments, the ENA price has staged strong growth with 60% gains over the last month. Although the ENA price lost some ground after hitting the peak of $1.45 in April this year, the market is seeing a major reversal from here onwards.
Bhushan Akolkar
Bhushan is a FinTech enthusiast with a keen understanding of financial markets. His interest in economics and finance has led him to focus on emerging Blockchain technology and cryptocurrency markets. He is committed to continuous learning and stays motivated by sharing the knowledge he acquires. In his free time, Bhushan enjoys reading thriller fiction novels and occasionally explores his culinary skills.
Disclaimer: The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
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