Ethena, a decentralized stablecoin protocol, saw its total value locked (TVL) exceed the $3 billion mark on June 2, and it has since reached a new high at $3.14 billion, according to data from DeFiLlama.
The crypto funds are locked to mint Ethena’s algorithmic stablecoin USDe. The USD-pegged token has become the fourth-largest stablecoin by market cap after Tether’s USDT, Circle’s USDC, and Maker’s DAI. It accounts for about 2% of the total market cap of all USD-backed stablecoins.
Ethena’s stablecoin was launched at the end of 2023, and it has become the fastest-growing USD stablecoin.
Meanwhile, ENA, Ethena’s governance token launched last April, is trading at $0.97 and has a market cap of $1.47 billion.
According to data from Token Terminal, Ethena surpassed Solana in 7-day revenue, reaching third place after Tron and Ethereum.
Ethena had its third-best revenue week from May 27 to June 2, generating over $7 million. It also hit a weekly record when revenue figures surpassed $8.3 million.
Token Terminal took to Twitter (now X) to say that Ethena is on track to generate over $220 million in revenue over the next 12 months.
While the dramatic collapse of UST and LUNA has affected the reputation of algorithmic stablecoins, Ethena is repairing the damage. It introduced a unique mechanism called delta hedging. Its USDe token is fully backed by the USD based on an on-chain mechanism.
The stablecoin is targeting delta neutrality thanks to a risk management mechanism in which the collateral’s price change risk is covered by short futures positions on derivatives platforms.
For instance, if Bitcoin is used as collateral, USDe will dynamically adjust the delta position by taking short positions against BTC derivatives on futures trading platforms like Binance, BitMex, or Deribit. If the BTC price declines, the short positions become profitable, maintaining a balanced reserve to back the stablecoin.
Below is an overview of Ethena’s collateral assets:
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