Ethena’s USDe Surges to Become the Third-Largest Stablecoin Amid 75% Market Cap Growth

Ethena Labs’ dollar-pegged stablecoin, USDe, has experience a meterioric rise in recent months, now standing as the third-largest after its market capitalization soared by 75% to approximately $9.3 billion in just three weeks.

This dramatic rise has propelled USDe past FDUSD, leaving only industry giants Tether (USDT) and Circle’s USDC ahead in terms of market cap.

This surge occurred as the total value locked (TVL) within Ethena’s protocol approached $10 billion, making it the seventh-largest platform in the decentralized finance (DeFi) space.

Analysts attribute this momentum to renewed regulatory clarity following the passage of the GENIUS Act by President Trump, which established the first comprehensive U.S. framework governing dollar-backed stablecoins.

Ethena’s partnership with Anchorage Digital, positioning USDe as a GENIUS-compliant stablecoin in U.S. markets, appears to have further boosted institutional adoption and inflows.

USDe stands out for offering holders returns ranging from 10% to 19% APY through a unique combination of staking rewards and funding rates, attracting investors seeking higher yields amid relatively modest returns from U.S. Treasuries compared to DeFi.

The spike in demand for synthetic dollars like USDe comes as the total supply of dollar-based tokens continues to expand, reaching about $257 billion—up from $200 billion in January.

Launched in early 2024, USDe utilizes a delta-neutral approach, matching onchain collateral with short positions in perpetual swaps to maintain its $1 peg.

While initial skepticism centered on its high yields and collateral volatility—prompting comparisons to Terra’s failed UST—USDe is fully backed by crypto assets and hedged positions.

Ethena has taken several steps to make its USDe stablecoin more secure and widely usable. It has partnered with more crypto exchanges to improve trading access and ensure there’s enough liquidity.

The platform has also broadened the types of assets backing USDe by including Bitcoin and popular stablecoins like USDT, which helps reduce risk from relying on just one asset.

To boost trust, Ethena now uses independent third-party firms to verify that it holds the necessary reserves, giving users and investors greater confidence in the stability and transparency of the system.

The breakout in USDe’s market cap began in mid-July and was accompanied by significant growth in Ethena’s ecosystem, now ranking among the top DeFi protocols.

USDe’s rise not only reflects broader stablecoin sector expansion but also signals strengthening investor confidence thanks to robust regulatory frameworks and institutional-grade custody solutions.