USDe Stays Resilient Amid Market Turbulence
Amid the backdrop of heightened market volatility spurred by the White House’s trade war threats, Ethena’s synthetic stablecoin, USDe, has demonstrated remarkable resilience. Unlike traditional stablecoins like Circle’s USDC, which are backed by fiat assets at a 1:1 ratio, USDe operates as a synthetic stablecoin. It maintains its $1 peg by collateralizing stablecoins and employing a hedged cash-and-carry trading strategy, which capitalizes on taking futures positions with significant open interest to stabilize its value.
Throughout the trading day on Monday, USDe effectively held its $1 peg, with only minor fluctuations that saw it dip to $0.999 at times. According to data from CoinGecko, the market capitalization of USDe has risen to over $6 billion, a notable increase from approximately $5.7 billion just a week prior. Additionally, on-chain data shows that the funding rate for USDe remained positive, which is essential for sustaining its dollar peg and ensuring market equilibrium.
A positive funding rate indicates that long position holders are paying a small fee to those holding short positions, reflecting a somewhat bullish sentiment in the market. Another factor contributing to USDe’s stability is its appealing yield-bearing nature; currently, USDe offers an annual percentage yield (APY) of 10%, a rate that has remained consistent over the past 30 days, as reported by a dashboard from Dune Analytics.
Concerns were raised last year regarding the sustainability of Ethena’s reserve fund for USDe, especially when a research firm, CryptoQuant, noted that the fund might struggle to maintain stability above $4 billion. However, the reserve fund has since grown in proportion to USDe’s market cap, reaching $46.6 million by the end of Q4 2024.
Is USDe a Safe Haven in the Crypto Market?
The combination of USDe’s stability and its yield-bearing characteristics has made it an attractive option for investors seeking refuge during turbulent times. Arthur Hayes, the chief investment officer at digital asset investment firm Maelstrom and co-founder of BitMEX, has increased his exposure to USDe significantly, anticipating that Bitcoin may drop to $75,000 in the coming weeks. In a blog post last week, Hayes shared, “Maelstrom has raised the amount of staked Ethena $USDe it holds to record levels and continues to take profits on several shitcoin positions.” He added, “We are still bigly net long, but if my feeling is correct, then we will be positioned with copious amounts of dry powder ready to buy the dip on Bitcoin and a mega dip on many quality shitcoins.” Notably, Hayes is both an investor in and advisor to Ethena.
