Ethena’s Fee Switch Looms as Stablecoin Surpasses DAI and USDS

The Ethena (ENA) token is currently exhibiting a descending channel pattern, which may indicate a potential reversal in the near future. This development has sparked interest among traders and analysts who are monitoring the evolving dynamics of the Ethena ecosystem, particularly in light of its expanding dollar-pegged stablecoin USDe. As the protocol's supply and revenue figures continue to climb, the market is closely watching how Ethena navigates its next phase of growth and governance structure [1].

The supply of USDe has increased by 42% in the past month, reaching an all-time high of $12.43 billion. This surge has positioned USDe as the third-largest dollar-pegged token in the market, trailing only Tether’s USDT and Circle’s USDC. The protocol's cumulative revenue has also reached a peak of over $61 million, making it a significant player in the decentralized finance (DeFi) space. USDe has surpassed the combined supply of DAI and USDS, and Ethena now ranks as the fifth-largest DeFi protocol by deposits [2].

Ethena’s strategic development is centered around its "fee switch" initiative, which will enable ENA token holders to share in the protocol’s revenue for the first time. This milestone is contingent on three key metrics: a circulating supply of USDe exceeding $6 billion, cumulative protocol revenue of at least $250 million, and integrations on four of the top five centralized exchanges by derivatives trading volume. The first two conditions have already been met, with the exchange integrations being the final hurdle. Ethena founder Guy Young has emphasized the importance of achieving this last milestone as a top priority [1].

USDe distinguishes itself from traditional fiat-backed stablecoins by utilizing a delta-neutral strategy. Rather than being backed one-to-one by dollars, USDe hedges user deposits using short positions on centralized exchanges. This approach aims to maintain a stable peg without relying on traditional collateral such as cash or Treasuries. While this innovative method has contributed to USDe’s growth, it has also attracted scrutiny from risk assessment firms. S&P Global Ratings has assigned USDe a 1,250% risk weighting in its evaluation, and Chaos Labs has raised concerns about potential liquidity issues on platforms like Aave due to rehypothecation [2].

Despite these risks, USDe has maintained a stable peg to the dollar and continues to attract both institutional and retail participants. Its on-chain integrations with DeFi protocols such as Aave and Pendle have enabled recursive lending structures, which amplify returns for users. This has made USDe particularly appealing for those seeking yield-generating opportunities in a rapidly evolving regulatory landscape. As Ethena moves closer to activating its fee switch, the market will be watching for signs of structural resilience and long-term sustainability [1].

Source: [1] Ethena fee switch milestone a 'top priority' as USDe hits $12bn (https://finance.yahoo.com/news/ethena-fee-switch-milestone-top-144856609.html) [2] Ethena's ENA holders set for cut of revenue as USDe locks ... (https://www.cryptopolitan.com/ethena-ena-holders-revenue-usde-in-top-three/)