Introduction
Currently, the total amount of USDe issued by Ethena is 5.3B, making it the fourth-largest stablecoin on-chain. However, the price of $ENA has continuously declined since the beginning of the year and has recently been fluctuating near historical lows, contrasting sharply with the thriving development of USDe. Therefore, this article will analyze the reasons behind the disproportionate growth of USDe and the price of $ENA from the perspectives of on-chain data and token economics, and then review Ethena's future development plans to summarize whether $ENA is still worth a bet.
Current development status of USDe
As is well known, unlike USDe and other stablecoins backed by physical assets, it is a synthetic stablecoin that adopts a Delta-neutral strategy.
What is a 'Delta-neutral strategy'? Simply put, it involves opening corresponding short positions in the contract market based on the held spot reserves to hedge against market volatility and maintain the stability of the USDe price.
For example, if a user deposits 1 ETH and mints 2000 USDe, Ethena will use this 1 ETH as collateral to open a short position on ETH in the exchange. When the price of ETH rises, the amount of ETH in the contract position decreases, while the total reserve asset value remains unchanged, allowing USDe to maintain its peg to 1 USD, and vice versa.
This strategy not only stabilizes the price of USDe but also earns fee income from the short positions. Especially when the market is in a one-sided bull market, the proportion of long funds will significantly increase, greatly boosting income from fees. Ethena will distribute these earnings to USDe stakers, providing considerable APY returns, which is also the main reason for the rapid growth of USDe.
According to official statistics, the daily APY for sUSDe has reached as high as 113%, but due to significant market volatility over the past three months, returns have declined, mostly fluctuating between 3% and 9%.
Figure 1, the changes in APY of sUSDe over the past three months, source: Ethena
Figure 2, the ratio change of USDe and sUSDe, source: Dune
However, even though USDe's performance has been relatively poor in recent months, its returns are still higher than many on-chain yields. Moreover, AAVE announced in April the integration of PT-sUSDe as collateral, allowing users to amplify their capital positions through circular borrowing while also locking in the returns of sUSDe in advance, further driving the growth of USDe.
According to DefiLlama's data, sUSDe accounts for 45% (2.1B) of the total TVL in Pendle, while PT-sUSDe accounts for 5.3% (1.3B) of AAVE V3, making it the fifth-largest collateral asset after weETH, wBTC, wstETH, and USDT, indicating that USDe has been deeply integrated into the existing DeFi ecosystem, highlighting its importance.
ENA's token economy
In terms of reward distribution, ENA holders cannot receive the underlying returns of USDe, and can only accumulate airdrop points from protocols like Ethena, Ethereal, Derive, Echelon, and Terminal. The uncertainty of expected returns is relatively high, so compared to USDe, the market demand for ENA is relatively lacking.
Figure 3, the airdrop points that sENA holders can accumulate, source: Ethena
In addition, Ethereal, as an on-chain trading platform centered around USDe, is a blue-chip protocol strongly supported by Ethena. It announced at the end of last year that it would distribute a 15% airdrop to sENA holders in Q1 of this year, but it has not officially launched yet, and the public test net only went live on June 20, with development progress seriously lagging, further affecting the confidence of ENA holders.
From the perspective of token economics, starting from the first quarter of this year, the token shares for core developers, investors, and foundations will begin to unlock significantly, which has somewhat increased the selling pressure on ENA. Especially in this cycle, most VC tokens have seen their prices plummet after listing, increasing the probability of VCs cashing out.
Figure 4, ENA unlock schedule, source: Ethena Docs
Weak token empowerment and a large amount of token unlocking may be one of the main reasons for the current poor performance of ENA, which has grown in inverse proportion to USDe.
However, most Web3 project tokens do not have any direct value empowerment. The sluggishness of ENA, in addition to the two factors mentioned above, is mainly because Ethena has not yet produced any new narratives aside from USDe, sufficient to stir FOMO emotions among market investors.
Therefore, the author will next introduce readers to Ethena's future strategic plans.
Converge
Converge is an L1 public chain co-built by Ethena and tokenization service provider Securitize, aiming to provide institutional-grade infrastructure to bring billions of dollars of institutional capital on-chain for the integration of RWA and DeFi, constructing on-chain finance suitable for large-scale adoption.
The Converge network has the following characteristics:
A high-performance environment compatible with EVM, with block times of less than 100 milliseconds, and capable of reaching hundreds of millions in throughput.
Using USDe and USDtb as Gas Fees.
Realizing account abstraction through ERC-7702 to optimize user experience.
Utilizing a validator network (CVN) based on sENA to provide institutional-grade security assurance.
Figure 5, the future ecological architecture of Converge, source: Converge Blog
With efficient operating speed and complete infrastructure, Converge can accommodate both permissionless and KYC/KYB-required DeFi applications and products. For example, crypto-native protocols like AAVE, Pendle, and Morpho can integrate Securitize's tokenized assets on Converge to launch services aimed at institutional clients.
Figure 6, the top ten RWA asset issuers, source: RWA.xyz
According to RWA.xyz's data, the total scale of on-chain RWA assets is currently about $24 billion, with more than $3.5 billion issued by Securitize, accounting for 27% of the overall market, among which the tokenized money market fund BUIDL backed by BlackRock has $2.8 billion.
Therefore, Ethena's construction of Converge is not just about creating a high-performance public chain exclusive to institutions; the collaboration with Securitize also represents that Ethena has opened up channels connecting traditional institutional capital, significantly increasing the likelihood of financial institutions issuing assets on Converge.
Converge was originally scheduled to launch its mainnet in the second quarter of this year, but so far, aside from announcing collaborations with projects like Arbitrum, Celestia, Pendle, and Centrifuge, only the pre-deposit activities of ecological projects Ethereal and Terminal are available, with no more specific launch time disclosed.
USDtb
Figure 7, the reserve ratios and distributions of USDe, source: Ethena
According to the stablecoin legislation (GENIUS Act) currently being promoted in the United States, compliant stablecoins must be pegged 1:1 to reserves, and the types of reserves are limited to high-liquidity dollar assets such as US dollars, short-term government bonds, money market funds, or tokenized assets. However, only 48% of USDe's reserve assets are USD stablecoins, with most others being BTC and ETH, accounting for 33% and 15% respectively. Additionally, as a synthetic stablecoin, it fails to meet the standards of the (GENIUS Act) in various aspects. Therefore, Ethena launched a compliant version of the stablecoin, USDtb, at the end of last year.
Figure 8, the composition of reserves for USDtb, source: USDtb
USDtb has 90% of its reserves composed of BUIDL, with the remaining 10% primarily in USDC, while USDT accounts for only a small portion. Minting and redeeming USDtb both require KYC and AML review processes, and a reserve audit report will be published monthly.
Although it has only been issued for half a year, the circulation of USDtb has approached $1.5 billion, making it the seventh-largest stablecoin on-chain, surpassing the total issued amount of PYUSD by Paypal by $500 million, growing at a rapid pace.
Nevertheless, the actual circulation rate of USDtb on-chain is currently not high, with 90% of USDtb still controlled by Ethena's wallets, and the total number of holding wallets is only 208. According to Arkham's tracking panel, there are only 43 addresses holding more than $10,000 in USDtb.
Figure 9, on-chain data for USDtb, source: RWA.xyz
These data show that Ethena has not yet started to promote USDtb vigorously, resulting in almost no users utilizing USDtb, possibly only a few large holders or institutions conducting tests.
However, in terms of trading volume, the trading volume of USDtb sharply increased in June, which may be related to AAVE incorporating USDtb into V3 Core as collateral at the end of May, leading to an increase in market demand for USDtb.
Figure 10, trading volume data for USDtb, source: Dune
The increase in trading volume may be a beginning. As USDtb integrates into more DeFi ecosystems in the future, Ethena can quickly raise the usage rate of USDtb by launching some incentive activities (such as the liquidity reward program of USD1 on the BNB Chain). In this way, Ethena will possess both USDe and USDtb stablecoins, with the former bringing greater revenue to Ethena, suitable for native crypto players, while the latter meets compliance requirements, giving it an advantage in expanding the Web2 market.
iUSDe
According to Ethena's roadmap released in January this year, iUSDe, a wrapped version of sUSDe with some transfer restrictions, was originally expected to be launched in February and managed by a regulated segregated SPV, allowing traditional financial entities to hold and trade conveniently.
Through iUSDe, traditional financial institutions can access the underlying returns of sUSDe, harvesting excess returns from crypto-native protocols, and the APR has a weak correlation with traditional interest rates, providing institutions with more diversified income sources.
At that time, USDe, USDtb, and iUSDe will respectively provide stablecoin services for different market demands, capturing the dividends brought by more stablecoin legislation.
However, since the roadmap was released, there has been no further development news regarding iUSDe.
Summary and Extended Thoughts
Overall, whether it is the currently thriving USDe or the still developing and planning USDtb and iUSDe, the related earnings from the stablecoin business will not flow to ENA holders.
The value and application scenarios of ENA are fundamentally based on betting on Ethena's future ecological development, including the Converge public chain (network nodes need to stake ENA), the decentralized exchange Ethereal (sENA accumulates airdrop points), the options platform Derive (sENA accumulates airdrop points), and other ecological cooperation projects. Its value needs to be realized after a period of accumulation, and the serious lag in the development progress of multiple projects, which is far from the official scheduled time, has led ENA holders to gradually lose confidence, unable to further stimulate market demand, coupled with the selling pressure from token unlocking, resulting in a relatively weak price for ENA.
However, apart from price factors, Ethena's strategic layout is quite clear: first, gain stable income through USDe, then launch compliant stablecoins USDtb and iUSDe targeting Web2 institutions and users, fully capturing the stablecoin market, and then expand the Ethena ecosystem centered around Converge to further enhance Ethena's brand influence.
In summary, staking USDe is equivalent to sharing the development dividends of Ethena at this stage, while betting on ENA is investing in the future of Ethena. The former has stable returns, while the latter has potential explosive opportunities. Regardless of which one is chosen, both have their pros and cons, but it is important to understand the investment logic and context of different targets to provide key support for one's decision-making.
This report is for informational sharing only and does not constitute any form of investment advice or decision-making basis. The data, analyses, and views cited in the text are based on the author's research and public sources and may contain uncertainties or change at any time. Readers should make investment judgments prudently based on their own circumstances and risk tolerance. For further guidance, it is recommended to seek professional advisor opinions.