Yesterday, Ethena Labs announced that they have integrated Bitcoin as a support resource for USDe.
They have defined it as a crucial step to allow their stablecoin to grow significantly compared to the current market capitalization of 2 billion dollars.
Summary
Ethena and USDe
Ethena is a crypto project launched a few days ago through the Binance Launchpool.
This is precisely a DeFi protocol of synthetic dollars in which the key and central role is played by the stablecoin USDe.
Ethena USDe currently has a market capitalization of just over $2 billion, and since its launch at the end of February, it first rose from 300 to 800 million, and then up to 1.5 billion dollars at the end of March.
With the launch of the ENA token through the Binance Launchpool, its market capitalization has jumped to 2 billion in just a few days.
Ethena is a protocol built on Ethereum, but USDe is already present on several layer-2 solutions, such as Arbitrum and Optimism, and on BSC.
USDe is in fact an algorithmic stablecoin, because it is not collateralized in US dollars (USD). The stability of the dollar peg is instead guaranteed through the use of hedging positions on derivatives, and guarantees held by the protocol as collateral, along with a minting and redemption arbitrage mechanism.
Initially the collateral was ETH (Ethereum), but as of yesterday BTC (Bitcoin) has been added.
The goal is to make USDe safer, especially after the many criticisms received in recent days.
Ethena: Bitcoin supporting USDe
Ethena Labs has also described some details of using BTC as collateral for USDe.
As of today, After the coverages represent about 20% of the open interest on ETH, but with a whopping 25 billion dollars of open interest on BTC, the scalability capacity of USDe increases by more than 2.5 times.
This is also because in the last 12 months, the open interest of BTC on the main exchanges (excluding CME) has grown from 10 to 25 billion dollars, while that on ETH has grown from 5 to 10 billion.
So the Bitcoin derivatives market is growing at a faster pace compared to Ethereum, thus offering better scalability and liquidity.
Furthermore, BTC provides a better liquidity profile and duration compared to liquid staking tokens, and since Ethena is approaching 10 billion dollars this provides a more solid support.
Bitcoin, however, does not guarantee a native staking yield like Ethereum, but staking yields are less significant in a bull run when funding rates are higher than 30%.
The $ENA governance token
The ENA token by Ethena was launched on the crypto markets on April 2nd.
At first, its price had shown excellent performance, as it had debuted on Binance at $0.3 and the next day had already risen to almost $1.25.
However, this +300%, which drops to +100% if we consider the launch price on other exchanges as well, has not been replicated.
Two days later, in fact, the price dropped to $0.93, and it was no longer able to rise above $1.20.
For example, in the last 24 hours it has lost 5%.
It is therefore possible that the boom the day after the launch was due to a speculative mini-bubble generated by an excess of enthusiasm, but it must be said that compared to the initial price, the gain is still 48%, if we take as a reference the $0.63 debut price on various exchanges.
Instead, for those who bought it on Binance immediately after the launch, at $0.3, the profit would still exceed 200%.
At this moment it is difficult to imagine how this dynamic can evolve, but it is clear that the day after the launch there was a bit of excessive enthusiasm in the crypto markets for this token.
Doubts about the Ethena protocol
Now Ethena Labs will start buying and selling BTC short as well as ETH, as part of the cash-and-carry operation that according to developers should allow the USDe stablecoin to be safer for users.
The many doubts that have been raised about it mainly stem from the fact that their platform is currently generating an annual return of 37%, although this is only a seven-day moving average that could also change at any moment.
This performance was generated by short selling ETH futures and pocketing the financing rates.
The doubt concerns the long-term sustainability of this mechanism, and above all what could happen to the market value of USDe in case these returns were to collapse.
In order to make this mechanism less vulnerable, short selling on ETH futures has been added to short selling on BTC futures. It is unlikely that this move will dispel all the doubts that the crypto community has raised about it.
