Ethena Labs, the team behind the synthetic dollar-pegged offering USDe, has recently announced the integration of Bitcoin (BTC) as a backing asset. This decision comes as a strategic move to scale USDe’s supply beyond its current $2 billion mark. Highlighting the significance of incorporating BTC, Ethena Labs emphasized the role of Bitcoin in enhancing USDe’s scalability. The team acknowledged BTC’s superior liquidity and scalability for delta hedging, providing a more secure environment for USDe users.
In the announcement, Ethena Labs noted the surge in Bitcoin’s open interest, which has increased from $10 billion to $25 billion over the past year. This growth outpaced the expansion of Ethereum (ETH) derivatives. Historically, BTC has exhibited resilience during bear markets, outperforming ETH in terms of funding yields. While Bitcoin lacks an inherent staking yield like staked Ether, Ethena highlighted that staking yields ranging from 3-4% may be less impactful during bullish market conditions, where funding rates can surpass 30%.
Ethena Labs utilizes a delta hedging approach within the derivatives market to maintain USDe’s peg. This strategy involves potentially holding short positions in Ether or ETH-related derivatives, which can yield gains if the asset’s value decreases. By implementing this method, Ethena can mitigate most of the downward fluctuations in USDe’s collateral.
Initially launched on the Ethereum blockchain on February 19, USDe was primarily backed by ETH, Tether (USDT), and Ether-based liquid staking tokens. However, with the integration of BTC, USDe’s backing has become more diversified and secure. The move aligns with Ethena Labs’ vision to provide a safer and more reliable product for its users. As of April 5, users will have transparent access to BTC backing positions through Ethena’s dashboards.
According to CoinGecko data, USDe currently ranks fifth in market capitalization among U.S. dollar-backed products, following USDT, USD Coin (USDC), Dai (DAI), and First Digital USD (FDUSD). The integration of BTC aims to strengthen USDe’s positioning in the market and signifies Ethena Labs’ commitment to expanding BTC integration in the second season of the Sats Campaign. Overall, the incorporation of Bitcoin as backing for USDe marks a significant step towards enhancing scalability and ensuring the stability of the synthetic dollar-pegged offering.
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