Author: Jack Inabinet, Bankless; Compiler: Deng Tong, Golden Finance
Many crypto tokens are in the red, but Ethena’s ENA has managed to buck the trend, rising nearly 10% to start the week! What’s causing ENA’s outperformance? Is the catalyst sustainable?
The ENA/BTC pair established a bottom this Sunday, the same day Ethena’s head of growth tweeted that next week will be important.
ENA rose against both BTC and the dollar throughout Monday after traders preempted the announcement, then surged to $1 for the first time in May in the early hours of Tuesday morning on news that its USDe synthetic dollar would be integrated with Bybit.
The partnership will support spot USDe trading pairs and allow Bybit users to use USDe as perpetual trading collateral, enabling them to achieve greater capital efficiency by offsetting a large portion of funding payments. In addition, users will be able to increase their yield by providing USDe to Bybit earn products.
If Bybit’s action on USDe proves to be a differentiating competitive advantage for traders, it is likely that more exchanges will embed synthetic USD into their own products, providing a huge boost to USDe’s adoption and positioning it to compete with USDT and USDC.
For Ethena to succeed, demand for long leverage must remain high to keep funding rates elevated, as this is where the project generates most of its revenue. Additionally, funding rate compression reduces the returns holders can earn, and Ethena suffers when rates turn negative.
While bull-run-driven high funding rates support USDe adoption in early 2024, the token’s supply has been falling since April 13, when the cryptocurrency market fell into a downtrend.
The continued compression in the funding rate market is beginning to suggest that the frenzy is over for now, and while USDe exchange integrations could help boost demand for the token, they won’t be able to save the product if returns decline further.
The growth of liquid staking and re-staking, the emergence of spot ETH ETFs, regulatory developments around staking, and potential changes to validator and issuance dynamics present a complex and interconnected landscape.
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