Originally published on: December 12, 2024
Ethena’s USDe stablecoin has made waves in the decentralized finance (DeFi) world by surpassing Sky’s Dai in total market capitalization. According to DefiLlama data, USDe now holds the title of the third-largest stablecoin, following closely behind Tether’s USDT and USD Coin (USDC).
While USDe’s market capitalization is still below $6 billion, it trails significantly behind USDT and USDC, which boast market caps of around $140 billion and $40 billion, respectively.
On the flip side, Dai’s market capitalization has seen a decline, dropping to approximately $4.5 billion from over $7 billion in 2022, as reported by DefiLlama. The collective market cap of all stablecoins now stands at just over $200 billion.
USDe, which was launched in February, has attracted billions of dollars from stablecoin holders seeking high APRs through Ethena’s innovative CeDeFi yield strategy. This strategy combines the best of DeFi smart contracts with offchain derivatives trading.
The CeDeFi approach combines DeFi elements with trading activities on centralized exchanges (CEXs). Since its inception, sUSDe holders have enjoyed an average APY of 17.5%, with peaks reaching 55.9% and lows hitting 4.3%.
Currently, staked USDe (sUSDe) offers approximately 24% in annual percentage returns, making it an appealing option for investors. Ethena allows users to mint USDe against assets like Bitcoin, Ether, liquid staking tokens (LSTs), and other stablecoins. The platform then mitigates volatility risks using offchain financial derivatives.
Despite the potential benefits, Ethena’s CeDeFi trading strategy does come with risks, such as failures by offchain exchanges, custodians, and settlement providers, as highlighted by Messari.
That said, USDe has gained significant traction, with Wintermute accepting it as trading collateral and sUSDe integrating with Aave in June. The asset has become the fastest-growing on the platform, showcasing its growing popularity.
In 2024, Ethena generated around $200 million in fees, prompting the Ethena Foundation to share a portion of those earnings with tokenholders. The native token of Ethena, ENA, has also seen a significant rise in value since June.
As Ethena continues to make strides in the DeFi space, the competition among stablecoins intensifies. Stay tuned for more updates on the latest developments in the world of decentralized finance.
