Ethena price is imploding as concerns about the network continue. ENA tumbled to a low of $0.7438 on Tuesday morning, down by almost 50% from its highest level this year. Its market cap has collapsed from $2.1 billion to $1.16 billion.
Ethena Whale dumps the token
ENA price continued falling this week after a big holder dumped the token and made a big loss. Data from Lookonchain shows that an unknown individual unstaked millions of tokens, making a big $2.7 million loss within a few weeks.
Data shows that the whale had initially made a big profit as the price of Ethena surged to a record high of $1.5177 in April. That profit-making changed as Ethena started tumbling, pushing him to capitulate and take a big loss.
There are signs that ENA token will continue falling in the coming days. As shown below, the token has remained slightly below the 25-day Exponential Moving Average (EMA) on the four-hour chart, signaling that bears are in control.
The other sign is that the token formed a head and shoulders pattern, one of the most popular bearish signs in the market. This pattern means that the token could continue being under pressure in the near term.
This view will be confirmed if the token plunges below the crucial support level at $0.7371, its lowest swing on May 1st. If it happens, it will point to more downside as bears target the next psychological level at $0.700.
Ethena TVL growth has stalled
The ongoing ENA price implosion is happening as demand for the token and the USDe stablecoin slows. Data by DeFi Llama shows that inflows have stalled. The network’s assets have remained at around 785,720 ETH or $1.08 billion since April. This is a big reversal since the network’s assets were in a strong uptrend between January and April 13th.
For starters, Ethena is a blockchain company aiming to provide investors with substantial returns. It operates USDe, the fifth biggest stablecoin in the industry after Tether (USDT), USD Coin (USDC), DAI, and First Digital USD (FDUSD). It has a market cap of over $2 billion.
As I have written before, USDe is sending memories of Terra USD (UST), a stablecoin that imploded in May 2022. UST promised holders double-digit returns, which soared to over 30% at some point.
Like Terra USD, USDe generates substantial returns of over 15.9% and is not backed by fiat currencies. Instead, it is an algorithmic asset whose stability comes from staked assets in the ecosystem. Its yield comes from the staked asset consensus and execution layer rewards and the spread earned from hedging derivatives positions.
Therefore, there are concerns that USDe could implode as we saw with other algorithmic stablecoins like UST. Also, the US Senate is considering the Lummis-Gillibrand legislation that would ban algorithmic tokens in the United States.
