Bitcoin

USDe

April

Ethena

First Digital USD

Ethena Labs, the team behind USDe, has added Bitcoin (<a href="https://cointelegraph.com/bitcoin-price">BTC</a>)&nbsp;as collateral to its synthetic dollar-pegged product with the hopes of scaling “significantly” from its current $2-billion supply.&nbsp;
With Bitcoin open interest increasing from $10 billion to $25 million over the past year on major cryptocurrency exchanges, USDe has the capacity to scale by a factor of 2.5, Ethena <a href="https://x.com/ethena_labs/status/1775944418924884127" target="_blank" rel="noopener nofollow">explained</a> in an April 4 post on X.
<a href="https://cointelegraph.com/news/ethena-usde-27-yield-concerns">USDe went live on Ethereum</a> on Feb. 19. At the time, Ethena promised a 27.6% annual percentage yield (APY) on staked USDe, prompting widespread concerns in the community. USDe’s APY topped out at 113% on March 5 but has since fallen to 7.15%.
<blockquote class="twitter-tweet">
 Excited to announce that Ethena has onboarded BTC as a backing asset to USDe This is a crucial unlock which will enable USDe to scale significantly from the current $2bn supply <a href="https://t.co/FOZRWBrVZV">pic.twitter.com/FOZRWBrVZV</a>— Ethena Labs (@ethena_labs) <a href="https://twitter.com/ethena_labs/status/1775944410011926931?ref_src=twsrc%5Etfw">April 4, 2024</a>
</blockquote> 
Ethena said Bitcoin would provide better liquidity and offer a more “safe” and “robust” product for USDe token holders.
<blockquote data-ct-non-breakable="true">
 “BTC derivative markets are growing at a faster pace than ETH and offer better scalability and liquidity for delta hedging.”
</blockquote>
<figure data-ct-non-breakable="true">
 <img src="https://s3.cointelegraph.com/uploads/2024-04/c0a1c235-bef6-48c2-9b95-6548c5e07d70.jpg" alt="" title="">
 <figcaption style="text-align: center;">
 Source: <a href="https://x.com/ethena_labs/status/1775944428504641673" target="_blank" rel="noopener nofollow">Ethena Labs</a>
 </figcaption>
</figure>
Ethena adopts a delta hedging strategy in <a href="https://cointelegraph.com/news/record-high-crypto-derivatives-daily-trading-volumes-deribit-coinbase">the derivatives market</a> to maintain USDe’s peg.
For example, Ethena may have short positions in Ether (<a href="https://cointelegraph.com/ethereum-price">ETH</a>)&nbsp;or Ether-based derivatives, which become rewarding when Ether’s price falls. As a result, Ethena can offset any downward volatility from USDe’s collateral to a considerable degree.
Prior to the Bitcoin addition, USDe was backed by ETH,&nbsp;Tether (<a href="https://cointelegraph.com/tether-price-index">USDT</a>)&nbsp;and Ether-based liquid staking tokens in proportions of 45%, 38% and 17%, respectively.
The firm sources the bulk of its collateral from Binance, Bybit and OKX in 59%, 15% and 20% proportions, respectively. Deribit, Bitget and BitMEX make up the remaining 6%.
Ethena acknowledged that Bitcoin doesn’t possess a <a href="https://cointelegraph.com/news/crypto-staking-rewards-now-four-hundred-fifty-percent-higher-stock-dividends">native staking yield</a> like staked Ether but said staking yields of 3%–4% are “less significant” during bull markets where funding rates can exceed 30%.
Related: <a href="https://cointelegraph.com/news/ethena-highest-revenue-generating-project-delphi-labs-ceo">Ethena will become highest revenue-generating crypto project — Delphi Labs CEO</a>
Ethena is trying to differentiate its synthetic dollar product from stablecoins by eliminating or significantly reducing reliance on the traditional banking system.
USDe currently boasts the fifth-highest market capitalization among United States dollar-denominated products, <a href="https://www.coingecko.com/en/categories/stablecoins" target="_blank" rel="noopener nofollow">according</a> to CoinGecko. 
Its $2-billion market cap only trails USDT, USD Coin (<a href="https://cointelegraph.com/usdc-price-index">USDC</a>),&nbsp;Dai (<a href="https://cointelegraph.com/dai-price-index">DAI</a>)&nbsp;and First Digital USD (FDUSD).
Magazine: <a href="https://cointelegraph.com/magazine/unstable-coins-de-pegging-bank-runs-other-risks-2023/">Unstablecoins: Depegging, bank runs and other risks loom</a>

Ethena Labs adds Bitcoin backing to its USDe synthetic dollar

Cointelegraph

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