USDe Maintains Stability Amid Market Turmoil, Surpassing $6B Market Cap
Despite the ongoing volatility triggered by the White House’s trade war threats, Ethena’s synthetic stablecoin, USDe, has managed to maintain its $1 peg, even as broader market conditions faltered.
Unlike traditional stablecoins like Circle’s USDC, USDe is a synthetic stablecoin that is not backed by fiat assets on a 1:1 basis. Instead, it maintains its peg by collateralizing stablecoins and using a hedged cash-and-carry trade strategy, which involves taking futures positions to help stabilize its value.
On Monday, USDe held steady at its $1 peg, with only brief fluctuations to $0.999. According to CoinGecko, USDe’s market cap has risen to over $6 billion, up from approximately $5.7 billion just a week ago. Additionally, on-chain data showed that USDe’s funding rate remained positive, a key factor in sustaining its peg and maintaining market equilibrium. A positive funding rate indicates bullish sentiment, as long position holders pay a fee to those holding short positions.
Another contributing factor to USDe’s stability is its yield-bearing nature, offering an annual percentage yield (APY) of 10%. This yield has remained stable over the past 30 days, as shown on Dune Analytics, making it an attractive option for investors in turbulent market conditions.
In the past, concerns had been raised about the sustainability of Ethena’s reserve fund for USDe, particularly when CryptoQuant suggested it might struggle to support more than $4 billion in circulation. However, the reserve fund has grown in line with USDe’s increasing market cap, now standing at $46.6 million at the end of Q4 2024.
Given its stability and yield-bearing features, USDe is becoming an increasingly popular choice for investors looking for refuge from volatile market conditions. Arthur Hayes, co-founder of BitMEX and chief investment officer at Maelstrom, revealed that his firm has increased its exposure to USDe to record levels, while taking profits from other riskier positions.
“We are still bullish in the long term, but we’re positioning ourselves with ample dry powder to buy Bitcoin on the dip and capitalize on market opportunities with select altcoins,” Hayes noted, adding that he remains an investor and advisor to Ethena.
