Ethena Labs, the creator of USDe, incorporates Bitcoin (BTC) as backing for synthetic dollar-pegged products.
The move is aimed at expanding the supply of USDe from its current level of $2 billion.
BTC boosts scalability and liquidity
The announcement, made through X's April 4th thread, highlighted the strategic importance of incorporating BTC as a backing asset.
Ethena Labs highlighted BTC’s role in enhancing USDe’s scalability, citing increased open interest on major exchanges. Over the past year, BTC open interest has surged from $10 billion to $25 billion, outpacing the growth of Ethereum (ETH) derivatives.
The team recognized the superior liquidity and scalability of BTC in delta hedging, providing a more secure environment for USDe users. Historical data also shows BTC’s resilience in bear markets, outperforming ETH in terms of funding yield.
Ethena also acknowledged that BTC lacks the same inherent staking yield as staked Ether. However, the team noted that in bullish market conditions, where funding rates can exceed 30%, staking yields in the 3-4% range have relatively little impact.
Ethena uses a delta hedging approach within the derivatives market to maintain its USDe peg. This includes the possibility of holding a short position in Ether or his ETH-related derivatives, profiting if the asset value decreases. As a result, Ethena is able to cushion most of the downside volatility of his USDe collateral.
History of USDe
USDe is launched Etena initially offered an annual percentage yield (APY) of 27.6% on staked USDe.
Despite peaking at 113% APY on March 5th, the yield has since fallen to 7.15%. Before the BTC consolidation, USDe was primarily backed by ETH, Tether (USDT), and Ether-based liquid staking tokens at a rate of 45%, 38%, and 17%, respectively.
The majority of collateral is sourced from Binance, ByBit, and OKX, accounting for 59%, 15%, and 20%, respectively, while the remaining 6% is sourced from Deribit, Bitget, and BitMEX.
According to CoinGecko data, USDe ranks fifth in market capitalization among USD denominated instruments, behind USDT, USD Coin (USDC), Dai (DAI), and First Digital USD (FDUSD).
With the integration of BTC, Ethena Labs aims to strengthen its support of USDe and ultimately provide users with a more secure and reliable product. This move is also in line with the company's vision for the second season of the Sats campaign, which will focus on expanding BTC integration.
Starting April 5th, users will be able to transparently access their BTC backed positions through the Ethena dashboard.
