Key Takeaways:
Ethena’s ENA token surged 550% in just five months.
USDe’s total supply grew by 1.5x, reaching $5.8 billion.
Maintaining high APY rates remains a key challenge for Ethena.
Since September 2024, the price of Ethena (ENA) has risen by 550%. What does this protocol offer to the market, and does it have potential?
Although Ethena is a young project, it has already entered the top 10 decentralized finance (DeFi) platforms by Total Value Locked (TVL). According to DeFiLlama, Ethena ranks 10th with a TVL of $5.8 billion.
Notably, the protocol is close behind Uniswap (UNI), the second-largest DeFi platform, with $5.9 billion.
Source: DeFiLlama
Ethena operates on Ethereum (ETH) and focuses on a single product: USDe, a synthetic dollar asset.
Unlike fiat-backed stablecoins like Tether’s USDT, USDe does not rely on physical reserves to maintain its 1:1 peg to the dollar. Instead, Ethena uses delta hedging, which employs perpetual futures to stabilize USDe’s price. In theory, this approach provides a more reliable link to the dollar. By continuously adjusting exposure to Ethereum or Bitcoin (BTC), this approach ensures a stable peg while staying true to crypto’s decentralized ethos.
Despite being a newcomer to the stablecoin market, USDe has reached 4th place by market capitalization, with $5.7 billion, according to CoinGecko.
Source: CoinGecko
It is unlikely that USDe will surpass giants like USDT ($139 billion market cap) or USDC ($52 billion market cap). However, Ethena may carve out a niche in the DeFi space.
Ethena’s Price Rises by 550% in Five Months
Ethena launched its token under the ticker ENA in 2024. During the initial weeks of trading, the token’s price reached $1.52 on April 11, marking its all-time high (ATH). However, a series of price drops followed.
On Sept. 6, ENA hit a low of $0.1951 before beginning a recovery. By Jan. 6, 2025, the token nearly matched its ATH, rising to $1.25.
As a result, ENA’s price increased by approximately 540%.
Source: CoinGecko
Revenue figures were also revealed. Token Terminal reports that Ethena ranks among the top 10 protocols by fees since the beginning of the year. The protocol secured 11th place with $32 million, surpassing Aerodrome (AERO), a popular asset among smart money and a project on the Base platform.
Source: Token Terminal
Why Is Ethena Growing?
The stablecoin market is highly competitive. Tether alone dominates the space with a substantial market cap, making it unlikely for any project to overtake it soon. However, one advantage of Ethena is that it operates as an ecosystem, not just a single product like USDe.
USDe holders can earn 13% APY through staking directly via the protocol (as of Jan. 24, 2025). This rate is considered high by industry standards.
Ethena is also developing a decentralized exchange (DEX) called Ethereal. USDe is expected to become one of the main assets on this platform, which will likely boost liquidity.
Source: Ethereal
Ethereum contributes to Ethena’s success as well. It is a proven blockchain and a leader in the DeFi space. Moreover, Ethereum remains the dominant blockchain for stablecoins.
According to CoinGecko, nearly 50% of stablecoins were on Ethereum as of September 2024, with Tron coming in second at 34.5%.
Source: CoinGecko
CryptoQuant data shows that the number of stablecoins on ERC-20 (Ethereum’s standard) began increasing sharply in October 2024. On Oct. 31, the total supply was 83.9 billion, growing to 111.3 billion by Dec. 25.
Source: CryptoQuant
This growth correlates with the rising total supply of USDe. According to Dune, USDe’s supply increased from 3.4 billion on Oct. 30 to 5.8 billion in January 2025, nearly a 1.5x increase.
Source: Dune
What Are the Risks of Ethena?
While the lack of dollar reserves is an advantage for Ethena, ensuring the decentralization of USDe, the rate peg still relies on third parties. In Ethena’s case, these third parties are centralized exchanges (CEXs) where delta hedging occurs.
According to official data, Ethena primarily uses Binance and Bybit to open positions. Bitcoin accounts for 57% of the collateral, followed by Ethereum at 29%.
Source: Ethena
The risk lies in the potential for these exchanges to be compromised or suffer reputational damage, which could jeopardize USDe’s peg to the dollar.
Additionally, part of the collateral is locked in Ethereum Liquid Staking Tokens (LSTs). Although this currently accounts for only 1%, the figure may grow as Ethena gains popularity.
Researchers from Pink Brains have also raised concerns about income distribution between USDe and ENA holders. While Ethena’s primary focus remains on USDe, the long-term sustainability of the current APY rates is uncertain. High APY percentages are often reduced after the early stages of such projects.
Ethena is still a new project, and it has shown promising results within its first year. Being part of the Ethereum ecosystem gives it a strong foundation to carve out a niche in the algorithmic stablecoin space.
It is worth noting that DeFi is experiencing rapid development, often referred to as a “DeFi Renaissance.” Stablecoins play a crucial role in this growth by providing liquidity and bridging decentralized applications with the centralized world.
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