Ethena’s decentralized finance (DeFi) stablecoin, USDe, has achieved a significant milestone by surpassing Sky's Dai (DAI) in market capitalization, now ranking as the third-largest stablecoin behind Tether (USDT) and USD Coin (USDC).
Despite USDe's market capitalization still trailing behind USDT and USDC, which stand at approximately $140 billion and $40 billion respectively, it has managed to carve out a notable position with less than $6 billion. In contrast, the once-dominant DAI's market cap has declined to about $4.5 billion from over $7 billion in 2022. The collective market cap of all stablecoins hovers just above $200 billion.
Launched in February, USDe has successfully attracted billions from stablecoin investors seeking high returns through Ethena’s CeDeFi yield strategy. This combines decentralized finance smart contracts with offchain derivatives trading. CeDeFi involves merging DeFi capabilities with trading activities typically associated with centralized exchanges (CEXs).
According to a Dec. 12 analysis by cryptocurrency researcher Messari, sUSDe holders have enjoyed substantial yields, with an average of 17.5%. Returns peaked at 55.9% on March 7, 2024, and reached a low of 4.3% on August 8, 2024. As of December 12, sUSDe offers an attractive annual percentage yield of approximately 24%, based on DefiLlama data.
Users can generate USDe by leveraging assets like Bitcoin, Ether, liquid staking tokens, and other stablecoins. Ethena manages the inherent portfolio volatility through offchain financial derivatives.
Messari notes that this strategy leverages yield from staked assets, along with perpetual and futures market spreads, benefitting sUSDe holders. Nevertheless, this approach is not without risk, including potential failures of offchain exchanges and custodians.
Despite inherent risks, USDe's adoption has been swift. In October, the trading firm Wintermute began using USDe as trading collateral. Moreover, in June, sUSDe was integrated into the DeFi lending platform Aave, quickly becoming its fastest-growing asset, according to Messari.
In 2024 alone, Ethena generated an estimated $200 million in fees. Subsequently, on November 15, the Ethena Foundation committed to redistributing a portion of these earnings to tokenholders. Ethena’s native token, ENA, has seen substantial growth, increasing fivefold since June, as per CoinGecko.
Concurrently, Sky underwent a rebranding to Maker in August and altered DAI, including changing its name to USDS. This transition has sparked debate, particularly concerning cybersecurity threats and the potential freezing of assets.