Ethena Labs has announced plans to scale the USDe stablecoin by integrating Bitcoin as an additional backing asset. The company shared on social media that this update aims to increase USDe’s stability, which currently stands at $2 billion, by leveraging Bitcoin’s liquidity. Ethena’s hedges now account for approximately 20% of Ethereum’s open interest, showcasing the significant expansion of USDe since its inception. With $25 billion of BTC open interest available for delta hedging, the capacity for USDe to scale has increased by more than 2.5 times.
Ethena Labs explained that the growth of BTC open interest on major exchanges, excluding CME, has gone from $10 billion to $25 billion in just one year. Additionally, Ethereum’s open interest has grown from $5 billion to $10 billion in the same period. Bitcoin derivative markets are outpacing Ethereum’s growth, providing enhanced scalability and liquidity for delta hedging. The integration of Bitcoin as a backing asset is expected to provide a more robust backing for USDe as it scales towards $10 billion, ultimately creating a safer product for users.
While Bitcoin may not offer a native staking yield like staked ETH, Ethena Labs believes that staking yields of 3-4% are less significant in a bull market where funding rates exceed 30%. Therefore, the company views the current market conditions as ideal for optimizing the scalability of USDe by integrating Bitcoin as a backing asset. This move is expected to provide better liquidity and duration profile compared to liquid staking tokens, further enhancing the stability and growth potential of USDe.
MakerDAO has proposed a $600 million investment in USDe and its staked variant, sUSDe, through Morpho Labs. This investment aims to leverage Morpho Labs’ lending capabilities and support the diversification of MakerDAO’s investments. The decision reflects user preferences for certain DeFi products and leverages, with a notable inclination towards USDe over sUSDe to reduce liquidity risks and increase Ethena’s insurance fund. The proposed investment cap is initially set at $600 million, with the potential for an increase up to $1 billion.
Overall, Ethena Labs’ decision to integrate Bitcoin as a backing asset for the USDe stablecoin is expected to enhance the stability and scalability of the coin. The significant growth of BTC open interest and derivative markets compared to Ethereum’s open interest highlights the potential for increased liquidity and robust backing for USDe. MakerDAO’s proposed investment in USDe further supports the growth and diversification of the stablecoin, reflecting user preferences in the DeFi space. With these strategic moves, Ethena Labs aims to strengthen USDe’s position in the market and provide a safer product for users.
