President Trump's every move has always stirred the nerves of the cryptocurrency market. Recently, he announced the inclusion of five cryptocurrencies—Bitcoin, Ethereum, Solana, XRP, and Cardano—into the United States' new digital asset strategic reserve list. This news quickly caused market turbulence, with the market capitalization of related cryptocurrencies soaring. This move not only signifies an important shift in U.S. cryptocurrency policy but also reaffirms Trump's profound influence on the crypto market.
However, Trump's cryptocurrency layout did not start today. As early as before and after his inauguration, his family and associated entities quietly conducted extensive layouts in the cryptocurrency field through a series of operations. Among them, Ethena Labs' governance token ENA is particularly noteworthy, becoming one of the key crypto assets that the Trump family focuses on after Bitcoin and Ethereum.
However, the keywords frequently discussed regarding ENA recently are not just the purchase of WLFI, but also its performance in responding to the Bybit hacking incident. Throughout the Bybit hacking incident, Ethena demonstrated top-notch public relations strategies and risk management capabilities. We summarize this with three words: swift, transparent, and professional.
Swift: Responding to the market immediately to stabilize user confidence.
Transparency: Clear information disclosure allows the market to see the real situation.
Professional: Accurate risk control execution, successfully responding to the largest redemption in history.
Quick response: Before market panic spread, quickly made users understand the safety of USDe's funds, preventing unnecessary bank runs.
After the incident, Ethena quickly released an announcement confirming that the collateral assets of USDe were not directly held on Bybit, ensuring that the market would not panic sell or rush to redeem due to rumors. The team further disclosed that the unrealized PnL exposure on Bybit was only 30 million USD and stated that there were sufficient reserves of 60 million USD as a safeguard, assuring that even if Bybit went bankrupt, it would not affect the stability of USDe. In terms of assets, because of the Off-Exchange Settlement (OES) solution, Ethena could adjust hedging positions directly without going through the exchange's withdrawal channels. Therefore, within minutes, Ethena began migrating its hedging positions from Bybit to other exchanges, effectively reducing potential counterparty risk.
Transparent communication: Through clear and continuous information disclosure, allow the market to rationally assess risks and avoid rumors and panic behavior.
After the incident, Ethena updated the progress of the event multiple times on Twitter. This transparency of information is particularly important in extreme market conditions, as it can significantly reduce the spread of FUD (Fear, Uncertainty, Doubt). The partner Copper ClearLoop (Ethena's OES custodian) also spoke out, confirming that the settlement process for all ClearLoop users was unaffected, further enhancing market confidence.
Professional risk control: Ensuring the continuous stability of USDe under extreme market emotions, preventing significant discounts.
After the outbreak of the Bybit hacking incident, USDe holders began large-scale redemptions due to market panic. Within a few hours, Ethena processed 120 million USD in USDe redemptions, the largest single-day redemption event since the issuance of USDe, even surpassing the scale of the largest liquidation event two weeks prior.
To ensure smooth redemptions, Ethena quickly adjusted the mint redeem contract:
Increased stablecoin reserves from 30 million USD to 250 million USD to ensure all users can redeem USDe instantly.
An additional 1.8B+ USD in stablecoin reserves as a backup, further enhancing market confidence.
In the secondary market, the price of USDe briefly showed a discount of less than 50bps (0.5%), but recovered to around 1 USD in less than an hour. This stability indicates that the market structure of USDe is relatively robust and liquidity management is reasonable. Previous brand accumulation has given users strong confidence in Ethena, preventing a sustained sell-off.
In the aftermath of the hacking incident, Ethena quickly realized unrealized PnL, optimized hedging strategies, and minimized exposure to Bybit, preventing potential exchange default risk.
Completed 30 million USD in PnL settlement within 90 minutes, ensuring fund safety. After the settlement, Ethena's exposure risk on Bybit was reduced to zero, ensuring that even if Bybit encountered more serious problems, it would not affect the stability of USDe.
Before the incident, 21% of Ethena's USDe hedging position was on Bybit, with a total scale of 1.2 billion USD.
After the incident, Ethena quickly reduced its position on Bybit to 15% (approximately 800 million USD) and transferred most of its positions to Binance.
During different stages of the incident, the Ethena team proactively updated the market situation, clearly emphasizing the risk management measures that had been pre-planned, such as the Copper ClearLoop custodian mechanism. Ethena's collateral assets have always remained outside of exchanges and were not affected by the hacking attack. They also informed users that Ethena's reserve funds could fully cover the maximum potential losses, ensuring that even if Bybit went bankrupt, the support for USDe would not be threatened, preventing the spread of market panic.
Yes, we used the term 'panic' here, as the market that day was indeed in a state of anxiety. In emergency situations, the public often finds itself in a state of high tension and uncertainty, and this emotion can quickly spread within groups, leading to emotional amplification, which is a well-known concept in psychology known as Mass Psychogenic Illness. In the investment industry, once market uncertainty increases, users can easily be influenced by panic emotions, leading to irrational decisions such as large-scale withdrawals and panic selling. In this incident, news of the Bybit hacking spread quickly, causing users to fall into a state of nervousness, with many starting to collectively redeem USDe, even though their assets were not directly affected. This group panic is one of the main reasons for market crashes or extreme volatility. Ethena handled this crisis properly and broke the panic cycle with a 'three-step' approach:
Step 1, respond to the market immediately to prevent the spread of rumors: Clearly inform users that the collateral assets of USDe are safe and not directly exposed to Bybit.
Step 2, provide data to support confidence: Use reserve funds and risk control mechanisms as actual data, allowing market participants to rationally assess risks instead of blindly following panic.
Step 3, quickly execute liquidity adjustments: Minimize dependence on Bybit as much as possible and ensure that all redemption requests are met, blocking further spread of panic.
This incident and Ethena's handling results indicate that Ethena is not only a technically sound DeFi protocol but also excels in brand management. They value brand reputation and demonstrated stable operational capabilities and public relations strategies during the crisis, setting a good example for the entire cryptocurrency industry. Such a team deserves more trust and expectations from the industry. I believe that their stablecoin product series and the newly launched DEX products can gain a larger market share.
