- Ethena’s USDe overtakes MakerDAO’s DAI to become the third-largest stablecoin by market cap
- The stablecoin has quickly gained traction, reaching $3.2 billion in circulation since its February launch
What happened: Ethena’s USDe defies expectations
Decentralized finance (DeFi) protocol Ethena’s stablecoin, USDe, has surpassed Sky’s Dai ( DAI ) in total market capitalization, becoming the third-largest stablecoin after Tether’s USDt ( USDT ) and USD Coin ( USDC ), according to data from DefiLlama. As of December 12, staked USDe, or sUSDe, is yielding approximately 24% annual percentage returns, according to DefiLlama.
Launched in February, USDe bootstrapped billions of dollars from stablecoin holders pursuing double-digit APRs from Ethena’s CeDeFi yield strategy, which combines DeFi smart contracts and offchain derivatives trading. CeDeFi refers to any strategy combining elements of DeFi and trading on centralized exchanges (CEXs). The coin allows users to mint USDe by using a variety of collateral types, including Bitcoin, Ethereum, and stablecoins, while mitigating volatility risks through off-chain financial derivatives. The success of USDe is attributed to its innovative model and wide adoption within decentralized finance (DeFi) ecosystems. As of October 2024, Wintermute, a leading cryptocurrency market maker, began accepting USDe as collateral for derivative and spot trading, further solidifying its role in the market.
Also read: Ethena Labs launches $ENA, bringing potential gains to traders
Also read: Ethena to integrate with exchange wallets, a new way to earn
What it’s important
The rise of USDe marks a pivotal moment in the stablecoin market, where innovation and competition are driving significant changes. While Tether (USDT) and USD Coin (USDC) have dominated for years, USDe’s surge signals the increasing importance of flexible, diversified models within decentralized finance (DeFi). Unlike traditional stablecoins backed by fiat reserves, USDe is collateralized by a broader range of assets, including Bitcoin and Ethereum, which may make it more appealing in volatile markets.
This growth has important implications for smaller companies in the DeFi space. For instance, platforms like Wintermute, a cryptocurrency market maker, are now accepting USDe as collateral, opening the door for new collaborations and increased liquidity. It shows that small, innovative companies can compete with established players by offering unique products. Furthermore, this shift could inspire other DeFi projects to explore hybrid financial models that integrate traditional finance tools, like off-chain derivatives, with blockchain technologies. In contrast to traditional stablecoins, which face increasing regulatory scrutiny, this could position USDe as a more resilient alternative, appealing to both traders and regulators who are looking for more stability and transparency in digital assets. However, as this space evolves, there remains a risk of overextension, and USDe’s reliance on off-chain instruments could expose it to risks that more centralized models avoid
