Ethena Labs recently announced plans to scale the USDe stablecoin by adding Bitcoin as an additional backing asset. The integration of Bitcoin aims to increase USDe’s stability, which currently stands at $2 billion. By leveraging Bitcoin’s liquidity, Ethena aims to enhance the stablecoin’s framework. Ethena shared that their hedges now account for approximately 20% of Ethereum’s open interest, showcasing the significant expansion of USDe since its inception.
With $25 billion of Bitcoin open interest available for Ethena to delta hedge, the capacity for USDe to scale has increased more than 2.5 times. The Bitcoin derivative markets have outpaced Ethereum’s in growth, providing enhanced scalability and liquidity for delta hedging. While Bitcoin may not possess a native staking yield like staked ETH, Ethena believes that staking yields of 3-4% are less significant in a bull market when funding rates are over 30%, making the current market ideal for optimizing the scalability of USDe.
MakerDAO recently proposed channeling $600 million in DAI into USDe and its staked variant, sUSDe, via Morpho Labs. This move 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 augment Ethena’s insurance fund. The recommendation proposes a $600 million investment cap initially, with a potential increase to $1 billion.
Ethena Labs views the addition of Bitcoin as a backing asset for USDe as a way to provide a more robust backing and ultimately a safer product for users as they scale closer to $10 billion. The increased liquidity and duration profile that Bitcoin offers compared to liquid staking tokens further enhances the stability and scalability of USDe. The integration of Bitcoin into USDe aims to leverage the growing Bitcoin open interest on major exchanges, which has seen significant growth over the past year.
The decision to add Bitcoin as a new backing asset for USDe showcases Ethena Labs’ commitment to optimizing the scalability and stability of the stablecoin. By leveraging Bitcoin’s liquidity and growth potential, Ethena aims to enhance the framework of USDe and provide a safer product for users as they continue to scale. The proposal to invest $600 million in USDe and sUSDe through Morpho Labs reflects MakerDAO’s confidence in the stablecoin and its potential for growth and diversification in the DeFi space.
Overall, Ethena Labs’ decision to scale USDe by adding Bitcoin as a backing asset demonstrates their commitment to enhancing the stablecoin’s stability and scalability. With the integration of Bitcoin and proposed investments from MakerDAO, USDe is poised to grow and evolve within the DeFi ecosystem. By leveraging Bitcoin’s liquidity and growth potential, Ethena aims to provide a safer and more robust product for users as they continue to expand and optimize the scalability of USDe.
