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Ethena‘s (ENA) US dollar-backed stablecoin USDe, launched in February, has achieved a significant milestone by exceeding a supply and consequently a market value of $2 billion in just seven weeks. This success positions USDe as a significant player in the stablecoin market, currently ranking as the fifth-largest stablecoin by market value. According to data from The Block, USDe’s market value crossing the $2 billion threshold represents about 1.25% of the $160 billion stablecoin market.
USDe Employs a Mechanism Distinct from Peers
Unlike traditional stablecoins, USDe stands out by using a unique mechanism that operates independently of direct fiat or asset backing. Instead, USDe utilizes an arbitrage system for minting and redemption against collateral positions, aiming to hedge derivative risks and maintain the stablecoin’s peg to the US dollar. Additionally, USDe leverages a cash and carry trade strategy to generate yield, which is then redistributed to stablecoin holders.
Previously accepting US dollars, Ethereum (ETH), or liquid staking tokens as collateral for USDe minting, Ethena has recently expanded its collateral assets to include Bitcoin (BTC). This strategic move is expected to significantly enhance USDe’s scalability, with Bitcoin’s liquidity and time profile for delta hedging being the driving factors behind the inclusion of these collateral assets.
Despite USDe’s innovative approach and rapid growth, concerns have emerged about potential counterparty risks and other factors related to yield generation strategies in the crypto market. While acknowledging these concerns, Ethena has outlined seven specific risks in the Frequently Asked Questions section of its official website, providing comprehensive analyses and reviews for each issue.
In a strategic funding round held in February, Ethena Labs raised $14 million at a valuation of $300 million with investments from leading organizations such as Dragonfly and the family office of BitMEX founder Arthur Hayes, Maelstrom. The launch of USDe coincided with this funding announcement, following a stealth launch in December 2023.
ENA AirDrop Requests Now Being Accepted
As known, Ethena began distributing 750 million ENA, corresponding to 5% of the total supply of 15 billion, to eligible participants by opening requests for an AirDrop of its governance token ENA on April 2nd.
Concurrent with the acceptance of AirDrop requests, the ENA token began trading on various centralized crypto exchanges (CEXs), including Binance, and at the time of writing this article, it has seen a 18.55% decrease in the last 24 hours, trading at $0.9033.
