Incorporating Bitcoin, Ethena Labs aims to enhance USDe's stability and scalability, leveraging BTC's liquidity for a more robust synthetic dollar.
In a significant move to enhance the stability and scalability of its synthetic dollar product, USDe, Ethena Labs has announced the integration of Bitcoin (BTC) into its backing assets. This strategic decision is aimed at making USDe a safer and more robust offering for its users, leveraging the substantial liquidity and scaling potential of Bitcoin.
Bitcoin, known for its resilience and widespread adoption, offers superior liquidity compared to other digital assets, making it an ideal choice for backing a stablecoin like USDe. Ethena Labs' decision to incorporate Bitcoin into USDe's backing assets comes at a time when Bitcoin's popularity is resurging, and its derivative markets are experiencing significant growth. Over the past year, Bitcoin's open interest has surged by 150%, outpacing the growth of ether, which was previously the sole backing asset of USDe.
The inclusion of Bitcoin is expected to allow USDe to scale by more than 2.5 times its current supply, which stands at roughly $2 billion. This scaling is crucial for Ethena Labs as it seeks to meet the growing demand for a stable and reliable synthetic dollar in the decentralized finance (DeFi) space. By leveraging Bitcoin's superior liquidity and duration profile for delta hedging, especially in bullish markets where staking yields are less significant compared to funding rates, Ethena aims to provide a directionally neutral way to earn money from funding payouts.
Ethena's strategy involves a cash-and-carry trade that stabilizes USDe's value through a combination of holding and shorting BTC. This approach is designed to provide a safer and more scalable solution for USDe issuance. By shorting BTC futures alongside ETH, Ethena not only aims to increase user yields but also to further scale USDe issuance. This method offers a directionally neutral way to earn money, making USDe a more attractive option for users seeking stability in the volatile cryptocurrency market.
