Ethena’s yield-bearing token, USDe, has experienced an impressive growth of $1 billion in the past month, bringing its total to $3.44 billion. This surge is largely attributable to the rise in perpetual funding rates amidst the ongoing crypto rally. Notably, the token now offers a substantial 29% annualized yield, rebounding from its previous downslide when yields were lower than the U.S. dollar risk-free rate during a period of crypto market correction.
USDe’s resurgence is being closely monitored by Decentralized Finance (DeFi) lenders and exchanges. Several have begun listing USDe as collateral assets, and plans are underway to distribute protocol revenues to governance token holders. These moves are expected to contribute to USDe’s continued growth.
The resurgence of Ethena’s yield-bearing token coincides with the crypto market’s revival following Trump’s election victory. Over the past month, the project’s USDe token has drawn approximately $1 billion in new capital, pushing its market capitalization to $3.44 billion as per the data from DefiLlama. The figure is now skirting close to its record value of $3.6 billion, achieved in July.
USDe operates as a “synthetic dollar,” with its price anchored at $1. Bitcoin (BTC) and Ether (ETH) are used as the backing assets. These are paired with an equal value of short perpetual futures positions on several exchanges. This strategy results in revenue generation on the backing derivative assets when the perpetual funding rates are positive. Some of the income is then passed on to investors as yield.
However, Ethena faced some challenges when the crypto markets cooled off from their March highs. In August and September, perpetual funding rates turned negative, making Ethena’s strategy less appealing to investors as yields dipped below the risk-free rate for the U.S. dollar. Consequently, investors withdrew $1.2 billion from the protocol between July and October.
With the crypto markets currently experiencing a bull run, with BTC breaking multiple all-time records, Ethena is now offering a 29% annualized yield to investors who stake their tokens, according to the project’s website.
Looking ahead, more catalysts could further fuel Ethena’s growth. Aave, a decentralized lending behemoth, has added the staked USDe token to its list of available collateral assets. This move allows users to borrow against the tokens while also earning a yield.
“Expect that the Aave integration […] will be a multi-billion supply sink for USDe within the next month, and two new CEX collateral listings are dropping within the next week,” Guy Young, Ethena’s co-founder and CEO, said in an X post on Friday.