Ethena (ENA) price has done well in the past few weeks even as most cryptocurrencies have wavered. The token was trading at $0.9175 on Wednesday morning, up by over 25% from its lowest point in April and by over 212% from its all-time low. This performance has pushed the token’s market cap to over $1.3 billion.
Ethena is growing
Ethena USDe has also grown to become one of the biggest stablecoins in the industry. It now has a market cap of over $2.2 billion. Only Tether, USD Coin (USDC), Dai, and First Digital USD (FDUSD) are bigger.
Ethena has also done well as the number of users in the ecosystem jumped. Most of these users are being attracted to its platform because of the substantial returns they are generating. Data on its website shows that Ethena USDe has grown to over 173.63k users globally and the number is growing.
Users are attracted to the stablecoin for its yield, which is much higher than most assets. For example, investing in US government bonds yields about 5%. As such, holding the token can give you a premium of over 10% against the dollar.
As I have written before, Ethena USDe generates a return from the staked ETH assets receiving consensus and execution layer rewards. It also makes its return from the delta hedging derivative positions in the network.
According to the developers, the network faces several risks, including the smart contract, liquidity, exchange counterparty, and market risks.
How safe is Ethena USDe?
USDe is significantly different from popular stablecoins like Tether (USDC) and USD Coin (USDC). These coins are backed 1:1 to the US dollar and are audited to ensure their safety. That explains why they can maintain their stability in periods of substantial withdrawals.
Read more: how to buy Tether.
USDe, on the other hand, is not backed by fiat dollars mirroring Terra USD (UST), which collapsed in 2022. Like USDe, UST was known for offering substantial yields of over 20%. It attracted over $40 billion from global investors. Therefore, it is always important to remember these risks when investing in the USDe stablecoin.
There is another risk for US investors. Senator Cynthia Lummis and Kirsten Gillibrand have come up with new legislation to govern the stablecoin industry. One of the provisions of this legislation is to ban any stablecoin that is not backed 1:1 by a real asset. If the legislation passes, it means that USDe will be banned in the United States.
What next for Ethena price?
Ethena price reacted mildly to Tuesday’s partnership deal with Bybit, one of the leading exchanges globally. The partnership means that the USDe stablecoin will be used as collateral to trade perpetuals in the ecosystem. It will also be paired with BTC and ETH pairs with no trading fees. Holders will be able to make returns within the Earn platform.
Turning to the four-hour chart, we see that the ENA token rose from a low of $0.7371 on May 1st to a high of $1.0328, its highest level on April 23rd. This recovery happened as the price of Bitcoin bounced back to over $63,000.
The token has now pulled back below the key support at $0.9425, its highest swing on April 29th. It has also remained slightly above the 50-period moving average. Therefore, the outlook for the token is neutral for now. The key support and resistance points to watch will be at $0.85 and $1.03.
Contributors
