Ethena’s recent resurgence has been fueled by a surge in perpetual funding rates, positioning it for further growth as the crypto market continues to gain momentum.
The crypto market’s rally following Donald Trump’s election victory has reignited interest in Ethena’s yield-bearing token, USDe. In the last month alone, USDe saw a remarkable $1 billion influx, pushing its market capitalization to $3.44 billion, just 5% shy of its record $3.6 billion peak in July, according to data from DefiLlama.
Ethena faced challenges earlier this year when the crypto market cooled down following a peak in March. The USDe token, designed as a “synthetic dollar,” is pegged to $1, using bitcoin (BTC) and ether (ETH) as collateral along with an equal value in short perpetual futures contracts across multiple exchanges. The strategy generates returns when perpetual funding rates are positive, passing on some of the earnings as yield to investors.
However, during August and September, when perpetual funding rates turned negative, the protocol struggled to attract investor interest, and yields fell below the risk-free U.S. dollar rate. As a result, Ethena experienced a $1.2 billion outflow from July to October.
With the crypto market now heating up again, fueled by Bitcoin’s new all-time highs, Ethena is seeing a revival. Currently, it offers an attractive 29% annualized yield for token stakers, according to its website. The resurgence of Bitcoin’s perpetual funding rates has provided a tailwind for Ethena, driving renewed interest.
Looking ahead, Ethena is poised for further expansion. Aave, the decentralized lending giant, has integrated staked USDe as collateral, allowing users to borrow against the token while still earning a yield. Ethena co-founder Guy Young anticipates that this integration will significantly increase USDe’s supply on Aave, projecting a multi-billion-dollar influx over the next month. Additionally, Ethena is set to list USDe on two more centralized exchanges (CEXs) in the coming week.
Ethena is also planning to share protocol revenues with ENA governance token holders. This decision was greenlit by the project’s risk committee, following a proposal from crypto trading firm Wintermute on November 6. With expectations of more favorable regulations for decentralized finance (DeFi) under a Trump administration, this move is seen as a strategic step to enhance the protocol’s growth.
