Ethena is experiencing a significant resurgence, driven by a favorable shift in market conditions and increasing adoption across the decentralized finance (DeFi) space.
In the wake of the recent cryptocurrency market rally following Donald Trump’s election win, Ethena’s USDe token has gained traction, attracting nearly $1 billion in fresh capital over the past month. This surge has propelled its market cap to $3.44 billion, just shy of its previous all-time high of $3.6 billion in July, according to data from DefiLlama.
Earlier this year, Ethena faced challenges as the market cooled after a peak in March. The protocol’s USDe token is pegged at $1 and is backed by Bitcoin (BTC) and Ether (ETH), combined with short perpetual futures positions. When the perpetual funding rates were positive, this strategy was highly profitable, offering lucrative yields for investors. However, when those rates turned negative in August and September, the protocol’s returns dropped below the risk-free rate, leading to a $1.2 billion withdrawal from the platform.
Now, as Bitcoin and the broader crypto market have surged to new heights, Ethena has regained momentum. The protocol is offering a 29% annualized yield to investors who stake their tokens, thanks to the recent spike in Bitcoin’s perpetual funding rates. This return has re-attracted investors, breathing new life into the protocol.
There are also several key developments ahead that could fuel further growth for Ethena. The decentralized lending platform Aave has now added the staked USDe token to its list of collateral assets, allowing users to borrow against their USDe holdings while continuing to earn yield. Ethena’s co-founder, Guy Young, believes this integration will drive significant demand, predicting that billions in USDe will flow into the platform within the next month.
Additionally, Ethena plans to share a portion of its protocol revenue with ENA governance token holders, further enhancing its appeal within the DeFi ecosystem. This governance initiative was approved in early November, following a proposal by crypto trading firm Wintermute. With the expectation of more favorable regulations for DeFi projects under a potential Trump administration, the future looks bright for Ethena as it positions itself for continued growth in the DeFi landscape.
