7 months ago
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Bitcoin backing diversifies USDe stablecoin
Ethena Labs, the decentralized finance (DeFi) protocol behind the USDe synthetic dollar, has announced the addition of Bitcoin as a backing asset for its stablecoin. The move is aimed at enabling USDe to scale significantly and provide a safer product for users, as traders increasingly embrace the resurgence of the world’s oldest cryptocurrency.
The decision to include Bitcoin as a collateral asset comes as Bitcoin derivative markets outpace their Ether-based counterparts. According to data cited by Ethena, Bitcoin open interest surged 150% to $25 billion in the past year, while Ether’s open interest grew by only 100% to $10 billion during the same period. This substantial liquidity and increased scaling potential offered by BTC derivative markets are key factors driving Ethena’s strategic move.
“BTC also provides a better liquidity and duration profile vs liquid staking tokens. As Ethena scales closer towards $10bn this provides a more robust backing, and ultimately a safer product for users,” the protocol said in an X thread.
USDe’s current supply is worth roughly $2 billion, and the protocol estimates that backing USDe with Bitcoin could enable it to scale by a factor of more than 2.5. This is particularly important as Ethena’s short futures positions, used to hedge the protocol’s ETH exposure, have ballooned to 20% of total Ether open interest.
Although Bitcoin does not offer a native staking yield like Ether, Ethena highlighted its superior liquidity and duration profile for delta hedging. Moreover, in a bull market where funding rates exceed 30%, staking yields become less significant, making Bitcoin an attractive backing asset.
The inclusion of Bitcoin as a collateral asset is expected to bolster the scalability and overall stability of USDe. The Bitcoin integration will be reflected in Ethena’s dashboards starting Friday, April 7th.
Ethena’s newly launched ENA token, which was recently airdropped to users, is currently trading at around $1, giving it a market capitalization of $1.5 billion. The protocol’s total value locked (TVL) is approaching $2 billion, showcasing the rapid growth and increasing demand for USDe.
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