Could Ethena Emerge as the Leading Altcoin by 2025?

Key Takeaways:

• Ethena’s ENA token experienced a 550% increase in just 5 months.
• The total supply of USDe expanded by 1.5 times, reaching $5.8 billion.
• Maintaining high APY rates remains a significant challenge for Ethena.

Since September 2024, the value of Ethena (ENA) has increased by 550%. What does this protocol offer to the market, and does it hold potential?

Although Ethena is a relatively new project, it has already secured a position among the top 10 decentralized finance (DeFi) platforms by Total Value Locked (TVL). According to DeFiLlama, Ethena ranks tenth with a TVL of $5.8 billion.

Importantly, the protocol is closely trailing Uniswap (UNI), the second-largest DeFi platform, which has a TVL of $5.9 billion.

Source: DeFiLlama

Ethena operates on the Ethereum (ETH) blockchain and centers around a single product: USDe, an artificial dollar asset.

Unlike fiat-backed stablecoins such as Tether’s USDT, USDe does not rely on physical reserves to maintain its 1:1 peg to the dollar. Instead, Ethena employs delta hedging, utilizing perpetual futures to stabilize USDe’s price. This method theoretically provides a more reliable connection to the dollar. By continuously adjusting exposure to Ethereum or Bitcoin (BTC), this approach ensures a stable peg while adhering to the decentralized principles of cryptocurrency.

Despite being a newcomer in the stablecoin sector, USDe has achieved 4th place in market capitalization, with $5.7 billion, according to CoinGecko.

Source: CoinGecko

It is improbable that USDe will surpass major players like USDT ($139 billion market cap) or USDC ($52 billion market cap). However, Ethena may establish a niche within the DeFi space.

Ethena’s Value Increases by 550% in 5 Months

Ethena introduced its token under the ticker ENA in 2024. In the initial weeks of trading, the token’s price peaked at $1.52 on April 11, marking its all-time high (ATH). However, a series of price declines followed.

On September 6, ENA reached a low of $0.1951 before beginning to recover. By January 6, 2025, the token nearly matched its ATH, rising to $1.25.

As a result, ENA’s price increased by approximately 540%.

Source: CoinGecko

Revenue figures have also been disclosed. Token Terminal indicates that Ethena ranks among the top 10 protocols by fees since the start of the year. The protocol secured the eleventh position with $32 million, surpassing Aerodrome (AERO), a favored asset among smart money and a project on the Base platform.

Source: Token Terminal

Why Is Ethena Rising?

The stablecoin market is highly competitive. Tether dominates the sector with a substantial market cap, making it unlikely for any project to overtake it in the near future. However, one advantage of Ethena is that it functions as an ecosystem, rather than just a single product like USDe.

USDe holders can earn 13% APY through staking directly via the protocol (as of January 24, 2025). This rate is considered high by industry standards.

Ethena is also developing a decentralized exchange (DEX) known as Ethereal. USDe is anticipated to become one of the primary assets on this platform, which may enhance liquidity.

Source: Ethereal

Ethereum also plays a role in Ethena’s success. It is a well-established blockchain and a leader in the DeFi sector. Furthermore, Ethereum remains the dominant blockchain for stablecoins.

According to CoinGecko, nearly 50% of stablecoins were on Ethereum as of September 2024, with Tron following at 34.5%.

Source: CoinGecko

CryptoQuant data indicates that the number of stablecoins on ERC-20 (Ethereum’s standard) began to rise sharply in October 2024. On October 31, the total supply was 83.9 billion, increasing to 111.3 billion by December 25.

Source: CryptoQuant

This trend aligns with the increasing total supply of USDe. According to Dune, USDe’s supply grew from 3.4 billion on October 30 to 5.8 billion in January 2025, nearly a 1.5x increase.

Source: Dune

What Are the Risks of Ethena?

While the absence of dollar reserves is an advantage for Ethena, ensuring the decentralization of USDe, the peg to the dollar still relies on third parties. In Ethena’s case, these third parties are centralized exchanges (CEXs) where delta hedging occurs.

According to official data, Ethena primarily utilizes Binance and Bybit to open positions. Bitcoin constitutes 57% of the collateral, followed by Ethereum at 29%.

Source: Ethena

The risk lies in the possibility of these exchanges being compromised or suffering reputational damage, which could threaten USDe’s peg to the dollar.

Additionally, part of the collateral is locked in Ethereum Liquid Staking Tokens (LSTs). Although this currently accounts for only 1%, this figure may increase as Ethena gains traction.

Researchers from Pink Brains have also expressed concerns regarding the distribution of earnings between USDe and ENA holders. While Ethena’s primary focus remains on USDe, the long-term viability of the current APY rates is uncertain. High APY percentages are often reduced after the initial phases of such projects.

Nonetheless, the challenge will be how to
• Balance yield distribution between sUSDe and ENA holders.
• Ensure sUSDe remains attractive with competitive yields (~9-12% APY).
It will be interesting to see how Ethena decides to address this, as the final approach could have a significant…

— Pink Brains (@PinkBrains_io) November 19, 2024

Ethena is still a nascent project, and it has demonstrated promising outcomes within its first year. Being part of the Ethereum ecosystem provides it with a solid foundation to establish a niche in the algorithmic stablecoin market.

It is important to note that DeFi is undergoing rapid development, often referred to as a “DeFi Renaissance.” Stablecoins play a crucial role in this evolution by providing liquidity and connecting decentralized applications with the centralized world.

The post May Ethena Become the Leading Altcoin in 2025? appeared first on Cryptonews.