The decentralized finance (DeFi) landscape is witnessing a significant shift as Ethena’s USDe dollar-pegged token experiences remarkable growth, surpassing $12 billion in circulation. This milestone represents a 42% increase in supply over the past month, marking an all-time high of $12.43 billion. The surge in USDe’s supply coincides with a notable rise in Ethena’s revenues, which have reached their peak since the start of the year, totaling over $61 million in August.
USDe now ranks as the third-largest dollar-pegged token in the market, trailing only behind Tether’s USDT and Circle’s USDC. It has successfully eclipsed the combined supply of other stablecoins like DAI and USDS and has emerged as the fifth-largest DeFi protocol by deposits.
Anticipation is building around Ethena’s upcoming fee switch, which could reward holders of the ENA governance token with a share of the protocol’s profits for the first time. Fee switches are traditionally significant developments, enhancing the value proposition for token holders. Recently, the Uniswap DAO, the largest decentralized exchange, made a move toward instituting a fee switch, emphasizing the potential benefits.
Ethena has outlined three key milestones to be met before activating the fee switch. These include achieving a circulating supply of USDe beyond $6 billion, reaching cumulative revenues of $250 million, and securing integrations with four of the top five centralized exchanges by derivative volumes. While Ethena has already met the first two criteria, the integration with centralized exchanges is crucial and remains a priority, as emphasized by Ethena founder Guy Young.
Ethena’s success unfolds amid a broader expansion in the market for dollar-pegged cryptocurrencies, which has surpassed $284 billion, fueled by recent stablecoin regulation in the US. Unlike established stablecoins such as USDT and USDC, USDe is not backed on a one-to-one basis by US dollars. Instead, Ethena employs a strategic approach by hedging the deposits used to mint USDe through bearish bets on centralized exchanges. This model positions itself as a stable alternative, minimizing exposure to market volatility.
Despite USDe’s currently stable peg to the dollar, concerns persist regarding the methodology used to back the token. Risks related to rehypothecation of backing assets have been highlighted by Chaos Labs, pointing to potential liquidity challenges on platforms like Aave. Furthermore, S&P Global Ratings assigned a high-risk weighting of 1,250% to USDe in its assessments, illustrating the cautious stance some analysts have regarding the token’s stability. Ethena Labs has refrained from commenting on these criticisms, but Young has previously assured that extensive measures have been adopted to preserve USDe’s stability.
For many DeFi users willing to embrace the associated risks, USDe presents compelling advantages over traditional stablecoins. The token can be staked to yield higher returns, with Ethena currently offering an impressive 9% yield on staked USDe— substantially better than the 4.2% available for USDC holders on platforms like Aave.
In parallel, key developments in DeFi governance are making headlines. Lido DAO has recently voted to migrate active validators to infrastructure operated by Twinstake, while Uniswap DAO has voted to launch Uniswap v3 on Ronin with co-incentives. Rootstock DAO is also providing additional support for the Beexo Wallet.
In an intriguing turn of events, on-chain investigator ZachXBT recently leaked information about crypto influencers, claiming to reveal their wallet addresses and fee structures for promoting projects. The leak suggests that many influencers have not adequately disclosed promotional content, raising questions about transparency in the space.
As the DeFi ecosystem evolves, the spotlight firmly remains on Ethena and its ambitious plans, alongside emerging trends and challenges that continue to shape the landscape.
