Ethena’s synthetic USDe dollar has emerged as the fastest-growing USD-pegged stablecoin over the past 30 days after its market capitalization skyrocketed 73% to an all-time high of $4.77 billion.
Surge has propelled USDe to become the third-largest stablecoin, surpassing DAI’s $4.7 billion market cap. However, USDe still lags behind Tether’s USDT at $135 billion and Circle’s USDC 40 billion dollars.
Guy Young, co-founder of Ethena Labs and CEO said:
“We are beginning to now see the effects as USDe blackholes every stablecoin in DeFi while warping lending markets to a new base rate However it has become evident that DeFi is insufficiently sized at the moment to close the arb entirely and larger pools of capital are required The next step for Ethena is plugging directly to $100b-1tn+ asset managers who can provide the capital required.”
Meanwhile, the rapid growth mirrors the momentum seen earlier this year when USDe’s market cap hit the $3 billion mark just four months after its public launch in February.
What is driving USDe’s growth
Market observers pointed out that USDe’s surge reflects strong dynamics fueled by bullish sentiment and demand for alternative yield-bearing assets.
USDe is primarily held for rewards, unlike USDT or USDC which are used widely as a medium of exchange. The majority of USDe tokens, however, are held for rewards.
USDe has a very attractive rate of return, mainly because it is based on Ethereum staking rewards and hedged by short-term rates for ETH. According to Ethena’s website, sUSDe holders can earn an annual percentage yield (APY) of 29%.
Notably, some critics have drawn parallels between Ethena’s model and the ill-fated Terra-Luna project. In May 2022, Terra’s algorithmic stablecoin collapsed after its aggressive growth strategy became unsustainable, leading to a significant downturn in the cryptocurrency market.
The demand for USDT remains strong, as evidenced by its APR and supply rates, which are significantly higher than those of USDC and USDT on Aave.
Aave has the biggest DeFi Lending Protocol in the Crypto Ecosystem. It boasts a Total Value Locked (TVL), which is around $30 Billion.
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