Ethena USDe Rules Stablecoin Market with $2 Billion Surge: USDT & USDC In Danger?

A newcomer has swiftly climbed the ranks in the stablecoin market, giving established players like USDT and USDC a run for their money.

USDe, a recently launched stablecoin, has accumulated a market cap of $2 billion in a very short period. What sets USDe apart from its counterparts is its unique approach to stability, backed not by physical US dollars but rather by cryptocurrencies like ETH and BTC. 

Under the leadership of Julio Moreno, Head of Research at CryptoQuant, USDe has adopted a unique strategy that’s turning heads and sparking discussions about its potential impact on the stablecoin market.

USDe’s Rapid Rise

USDe’s rapid climb to a $2 billion market cap has caught the attention of investors and industry experts alike. Unlike other stablecoins tied to fiat reserves or supported by cryptocurrency over-collateralization, USDe maintains its solid 1:1 peg to the US dollar through a method called “delta hedging staked Ethereum collateral.”

This fresh approach shields USDe from the volatility of its underlying assets, ensuring stability even when the market is unpredictable.

Insights from Ethena Labs founder highlight USDe as the fastest-growing stablecoin since its launch. One key factor driving USDe’s success is its ability to generate returns for holders, a feature notably absent in leading stablecoins like USDT and USDC.

USDe achieves this by leveraging funding payments from short positions on exchanges and ETH staking rewards, setting it apart from the competition.

Innovation at Play

Julio Moreno, Head of Research at CryptoQuant, stresses two critical factors for USDe investors: the size of the reserve fund relative to market cap and the keep rate, which reinvests generated yield.

As USDe’s market cap grows, so do funding payments from short positions. Moreno recommends keeping the keep rate above 20% to ensure USDe’s stability and avoid the fate of other stablecoins like Terra’s UST.

For example, with market caps of $5 billion, $7.5 billion, or $10 billion, the reserve fund ideally should be around $40 million, $60 million, and $80 million, respectively.

Long-Term Stability

USDe is swiftly adjusting to market changes to secure its long-term stability. By closely monitoring key metrics and actively managing risks, USDe aims to become a reliable option for investors.

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