Ethena is on an expansion streak for its USDe supply, reflecting favorable market conditions. USDe’s growth has put the asset ahead of DAI/USDS, as investors migrated because of the higher yield of the Ethena protocol.
The supply of the stablecoin continued to expand above 5B tokens and has now broken above the total circulating DAI/USDS. The supply of DAI stalled for months as Maker DAO was handling its rebranding and shift to a new collateral structure as part of the Sky Ecosystem.
The Sky ecosystem has been more conservative in its growth, mostly relying on Aave partnerships, while overhauling its portfolio of assets. DAI remains one of the key stablecoins for DeFi, retaining sustainable demand, but USDe is riding a new hype wave.
The total supply of USDe expanded to $5.564B, becoming the third-largest stablecoin and the most influential DeFi stablecoin. Ethena Labs celebrated the 5B token milestone on December 5, and less than a week later, the supply added another 5% in growth.
The last 3B tokens were minted in the past two months, as BTC reached new records and ETH started on a path of recovery.
USDe supply grows on favorable market conditions
USDe is entirely synthetic, tied to Ethena Labs’s earning potential. The supply growth in the past few months has been the steepest so far, as it easily surpassed its previous peak of 3.6B tokens. In 2024, the Ethena Labs issued stablecoin expanded from an initial supply of just 34M tokens, having survived a market drawdown in Q3.
USDe is mostly used as a passive income token, with only $103M in daily trades. Unlike other stablecoins, USDe has limited trading pairs and swaps just 1.82% of its supply daily. It is also used more conservatively as collateral in other protocols.
Part of USDe’s stability lies in its staked form, which has a minimum of seven days and up to 90 days for withdrawal. Staked USDe (sUSDe) also grew rapidly to above 3.75B tokens, while offering yields of 30%.
In the past year, sUSDe has been trading at an ever-growing premium, currently reaching $1.13. However, the asset is mostly swapped on the Curve DEX and has a relatively limited market. The staked form may also fluctuate during unfavorable market conditions, requiring either a supply burn or a new strategy from Ethena Labs.
In the meantime, Ethena found ways to offer higher returns to generate more demand for stablecoin investments. Ethena’s approach is considered riskier, but a favorable market scenario allows the protocol to expand its stablecoin issuance and offer its high yields.
The expansion of USDe arrives at a time when the total circulation of stablecoins is at $192.8B, dominated by USDT and USDC. Asset-backed stablecoins are one of the main factors for the expansion of the crypto market, which also leads to the growth of DeFi.
Ethena Labs reached peak earnings in November
A general bullish trend for ETH and funding for long positions make up the ideal conditions for Ethena Labs. As a result, Ethena achieved $7.1M in monthly earnings, surpassing its October record of $3.14M.
Previously viewed with skepticism, Ethena Labs managed to show its strategy for market drawdowns, as ETH cycled between bullish expectations and drawdowns.
The native ENA token reflected the project’s expansionary stage. ENA recently recovered above $1.07, later sliding to $0.97. ENA may not finish the year with a net gain, but Ethena Labs has positioned itself as a fat fee app.
Ethena Labs also attempts to grow aggressively as the protocol is still smaller compared to other DeFi hubs. Ethena is just behind the Maker/Sky Ecosystem in terms of collaterals and value locked even though it is solidly in the top 10 among DeFi apps. Ethena Labs locks in $5.56B in value based on the valuation of USDe in circulation.
Ethena Labs has been riding the recently improved ETH market sentiment. The switch to an altcoin season helped ETH break above $4,000 for the first time in months, and gain support at the $3,700 level. At the time of this publication, ETH trades at $3,701.61 as BTC recovered the $98,000 level.
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